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Gold prices have come under pressure as US real yields, which often move inversely to bullion, increased slightly to 2.089%. The increase in yield decreases the appeal of gold, as higher yields make non-yielding assets less attractive to investors. Recent US inflation data shows the Consumer Price Index (CPI) rising as expected to 2.6% year-over-year. Core CPI is also aligned with forecasts. This steady inflation supports the view that the Fed may adjust rates cautiously. The expectations of a rate cut impact demand for safe-haven assets like gold.Moreover, key Fed officials signal that further rate cuts may be limited. Minneapolis Fed President Neel Kashkari and Dallas Fed’s Lorie Logan suggest making policy adjustments carefully, even as inflation improves. Other Fed members further support the sentiment. St. Louis Fed’s Alberto Musalem emphasized that inflation remains a concern. This caution from the Fed reinforces a stable interest rate environment. This could constrain upward movement in gold prices as steady or rising rates strengthen the US dollar.Donald Trump’s victory has shaken the gold market, as expectations of tax cuts and tariffs could fuel inflation. This may limit the Fed’s flexibility in cutting rates further. The current “Trump trade” sentiment elevates US yields and the dollar, adding short-term pressure on gold prices. A stronger dollar typically reduces global demand for gold.
Gold Drops Amid US Dollar Strength – Technical PerspectiveThe daily chart for the gold market shows that the price is correcting from strong resistance at $2,790, near the red-dotted trend line. The price has reached a strong support area within the ascending broadening wedge . This support intersects with the black trend line from the April 2024 high. The emergence of an ascending broadening wedge highlights a solid bullish pattern. This is further supported by double bottoms formed within the pattern.(Click on image to enlarge)
A rebound from this region could drive the gold market higher. Investors are viewing this area as a potential buying opportunity.
Trading Gold during Geopolitical Crisis and Political InstabilityAnalysts expected Donald Trump’s victory to drive commodities higher, anticipating that cryptocurrencies would also gain following the election. Bitcoin has hit a fresh record high, and in the current market dynamics, gold and bitcoin are trading as alternative assets. When bitcoin started the surge following the breakout, the gold market started correction from the resistance. This divergence may reflect a shift in investment from gold to bitcoin. However, gold investors find the stability of gold investments attractive for the long term, viewing this shift as a buying opportunity.Trading in response to geopolitical crises and political uncertainty is challenging. Therefore, traders may consider buying on dips and booking profits when prices reach target levels. For instance, the chart below illustrates a trade Gold Predictors shared with premium members. They took profits at the $2,790 resistance level before a sharp price drop, resulting in strong profits. Traders may consider implementing strategic positions like these to capitalize on the current market environment.(Click on image to enlarge)
The chart below shows the trading decisions executed during the US presidential election. These trades were shared with members via email and WhatsApp. Traders applied the same strategy during the high-volatility period of the US election, resulting in successful and profitable trades.(Click on image to enlarge)
Conclusion
In conclusion, gold prices remain under pressure due to rising US real yields and stable inflation. This reduces the appeal of non-yielding assets like gold. While the Fed’s cautious approach offers some stability, a strong US dollar and high yields continue to weigh on gold. Technical analysis suggests a potential buying opportunity at a key support level, with patterns indicating a possible rebound. Following Trump’s election, political events may encourage traders to buy on dips and take profits at resistance levels. Traders must adapt to geopolitical and economic changes, such as inflation and Fed policy. This approach will help them benefit from gold’s movement in this complex market.More By This Author:
Gold Drops On Trump Victory As US Dollar Strengthens
