• Sun. Feb 16th, 2025

Gold Prices Edge Higher as US Bond Yields Fall

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  • While US bond yields fell slightly, gold prices gained some strength.
  • The Fed’s hawkish stance is good for the dollar and will keep precious metals prices under control.
  • Risk appetite momentum will prevent further declines in XAU/USD.

Gold prices (XAU/USD) attracted some buyers during the Asian session on Tuesday, reversing some of the previous day’s gains and retreating from a near one-month peak last week. US President Donald Trump’s top economic advisors are reportedly considering gradually increasing taxes to prevent rapid inflation that could lead to a recession. US Treasury yields and gold prices have declined. In addition, there is no clear catalyst for the rise in oil prices and they will remain low unless the Fed has hawkish expectations.

A disappointing U.S. nonfarm payrolls report on Friday raised hopes that the U.S. Federal Reserve will slow the pace of rate cuts this year. That helped the U.S. dollar (USD) pare its gains after falling from its highest level in more than two years on Monday and should act as a boost to U.S. bond yields. Meanwhile, easing concerns about Trump 2.0’s damaging tariffs on the economy boosted investor confidence and urged caution before making new bets on gold. Traders are now looking to the U.S. producer price index (PPI) for new energy.

Gold Price Supported by Falling US Bond Yields, but Upside Capped by Hawkish Fed Outlook

  • President-elect Donald Trump’s economic advisors are considering a plan to gradually increase tax rates each month, Bloomberg reported, citing sources familiar with the matter.
  • This move, which was aimed at supporting energy-related talks and preventing a rapid interest rate hike, led to a slight decline in U.S. Treasury bond yields and increased demand for gold prices.
  • The sizzling US job report cemented expectations the Federal Reserve will proceed with caution while cutting rates this year, which helps the US Dollar to stall Monday’s pullback from over a two-year high.
  • The Fed’s hawkish outlook should also limit the benchmark 10-year US Treasury bond yields’ corrective slide from a 14-month high and keep a lid on any further gains for the non-yielding yellow metal.
  • US President-elect Donald Trump has repeatedly promised to end the conflict in Ukraine and said that he will meet Russian President Vladimir Putin “very quickly” after he takes office next week.
  • The US indicated that a ceasefire deal is on the brink of success while Hamas said talks are progressing well. Two Israeli officials said that Hamas will release 33 hostages in the first phase of the ceasefire agreement.
  • Investors are now eyeing key economic data for some support, first industrial production figures due later today and then U.S. consumer spending figures due Wednesday.

Gold Price Bulls Maintain Control Above $2,610 Support from 100-Day EMA and Trend Line Confluence

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From a bullish perspective, a strong move above the $2,676-$2,677 zone would encounter resistance in the $2,690 zone, followed by a move above the $2,700 level. Some buying would set the stage for a continuation of the three-week-plus rally, pushing gold prices toward the $2,716-$2,717 level and December monthly highs around $2,726 per capita.

On the other hand, Monday’s lows in the $2,657-$2,656 range are likely to continue to resist further declines. However, a break below this level could accelerate the decline towards the $2,635 region. The downside could extend to the conjunction of the 100-day exponential moving average (SMA) and the multi-week uptrend line at $2,610.