Gold Prices pulls back prior US Retail Sales data

• Gold price enters a bearish consolidation phase near a one-week trough touched on Monday.
• Geopolitical tensions, softer US bond yields and USD offer some support to the XAU/USD.
• Bets for a less dovish Fed seem to cap the XAU/USD ahead of the FOMC meeting this week

The gold price (XAU/USD) has made a modest recovery from the one-week low it reached earlier this Monday. However, it is presently trading at approximately $2,655, and there is no follow-through buying. The US Dollar (USD) supporters remain on the defensive as a result of a slight decrease in the yields on US Treasury bonds, which provides some support to the commodity.

Moreover, the safe-haven precious metal continues to be supported by a marginally positive tone due to persistent geopolitical risks and concerns regarding the policies of US President-elect Donald Trump. However, the non-yielding Gold price appears to be facing a headwind as a result of the increasing consensus that the Federal Reserve (Fed) will reduce the tempo of its rate-cutting cycle, which is occurring in response to indications that inflation is at a standstill in pursuit of the 2% target. Ahead of the critical two-day FOMC monetary policy meeting, which commences on Tuesday, traders appear to be hesitant and prefer to remain on the periphery. However, the XAU/USD appears to have temporarily halted its retracement decline from the one-month high it reached last week.

The gold price is bolstered by a modest USD decline, milder US bond yields, and geopolitical risks the potential for a further escalation of tensions in the region is increased by Israel’s recent agreement to allocate state funds to expand its presence and double its population in the occupied Golan Heights. The Israeli military reported that its air and ground forces in the northern region of the enclave killed dozens of militants and captured others, while attacks in Gaza resulted in the deaths of at least 53 Palestinians.

NATO Secretary General Mark Rutte has issued a warning that Russian President Vladimir Putin intends to eradicate Ukraine from the map and may pursue other regions of Europe in the future.
According to the Syrian Observatory for Human Rights, Israeli fighter aircraft conducted an air strike on radars in eastern Syria and targeted missile launchers in southern Syria.
The FedWatch Tool of the CME Group suggests that traders are estimating a probability of over 93% that the Federal Reserve will reduce borrowing costs by 25 basis points on Wednesday.
Expectations that the Federal Reserve will reduce the pace of its rate-cutting cycle next year were further bolstered by the publication of the US Consumer Price Index (CPI) and the Producer Price Index (PPI) last week.

On Friday, the benchmark 10-year US government bond’s yield reached a three-week high as a result of speculation that the Federal Reserve would be less dovish, which is expected to limit the price of gold, which is non-yielding.

The release of global flash PMIs is scheduled for Monday’s economic agenda. This event has the potential to impact the broader risk sentiment and provide a boost to the safe-haven precious metal.
Nevertheless, the FOMC’s critical decision on Wednesday will be the primary focus. The accompanying policy statement and the remarks of Fed Chair Jerome Powell will also serve as indicators for traders. Some sellers are expected to be attracted to the gold price at higher levels; the $2,700 mark retains the key.

The Asian session low, which is located in the $2,644-2,643 range, is accompanied by a congestion zone from a technical standpoint. The Gold price has the potential to be dragged to the $2,625 region by some follow-through selling, en route to the monthly low, which is located around the $2,614 zone and the $2,605-2,600 pivotal support. A convincing break below the latter will be perceived as a new catalyst for bearish speculators, potentially leading to even greater losses.
Conversely, the $2,665-2,666 region currently appears to serve as an immediate obstacle in advance of the $2,677 region, beyond which the gold price may attempt to reclaim the $2,700 round figure. The subsequent upward movement may extend further towards the monthly swing high, which is located in the $2,726 region. If this level is decisively cleared, it will establish the foundation for an additional near-term upward movement.