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Gold ticks up as US Dollar, Treasury yields ease

2024-12-16
  • Gold reversal from last week’s highs finds some support as the US Dollar retreats.
  • Lower US yields and a softer Dollar might provide some support for Gold as the market readies for the Fed interest-rate decision.
  • XAU/USD remains under pressure, dangerously close to the $2,635 support area.

Gold (XAU/USD) opens the week on a moderately positive tone, favored by a mild US Dollar (USD) reversal amid lower US Treasury yields. The precious metal, however, is still close to recent lows following a 2.5% sell-off late last week.

US Treasury yields pull back on Monday following a sharp rally last week, erasing some of the recent bullish pressure on the US Dollar. Investors seem wary of placing directional US Dollar bets as they brace for the all-important Federal Reserve (Fed) monetary policy decision on Wednesday.

The market is almost fully pricing an interest rate cut, but only gradual easing next year. This, coupled with expectations that Donald Trump’s policies will stir inflationary pressures, is acting as a tailwind for the US Dollar.


Daily digest market movers: Gold finds support amid ongoing geopolitical tensions

  • Gold is suffering on expectations of a shallow Fed easing cycle but keeps drawing support from the highly volatile situation in the Middle East.
     
  • Israel keeps attacking military targets in Syria and considering an expansion of the Golan Heights settlements, which has met with the opposition of Saudi Arabia, Qatar, and the United Arab Emirates.
     
  • In Monday’s calendar, the US S&P Preliminary PMIs are expected to show a moderate contraction in manufacturing activity and slower growth in the services sector.
     
  • The NY Empire State Manufacturing Index is also expected to have deteriorated to a reading of 12 in December, from 31.2 in the previous month.
     
  • The impact of these figures on the Dollar, however, is likely to be limited ahead of Wednesday’s Fed decision.
     
  • The CME Group’s Fed Watch Tool shows a 97% chance that the US central bank will cut interest rates by 25 basis points on Wednesday. Still, for 2025, markets are pricing in just two more cuts, fewer than the three seen earlier this month.