Gold price lacks bullish conviction amid elevated US bond yields but sticks to intraday gains

• The gold price maintains its intraday gains, but it lacks bullish conviction in the face of elevated US bond yields
• A portion of Thursday’s retracement decline is reversed as a result of dip-buying in the gold price
• The commodity continues to be favored by geopolitical risks, trade war concerns, and Fed rate reduction bets

The precious metal is restricted by expectations for a less dovish Federal Reserve and elevated US bond yields. Despite the absence of follow-through buying, the gold price (XAU/USD) maintains its intraday positive bias during the early European session on Friday, although it remains below the $2,700 threshold. The elevated yields of US Treasury bonds are still supported by the expectation that the Federal Reserve (Fed) will adopt a cautious approach to reducing interest rates, given the indications that the progress toward reducing inflation to its 2% objective has stalled.

Consequently, the US Dollar (USD) is able to maintain its recent gains, which have reached a new monthly high, and the upside potential of the non-yielding yellow metal is capped.
That being said, the safe-haven Gold price remains supported by persistent geopolitical risks resulting from the Russia-Ukraine conflict, tensions in the Middle East, and concerns regarding the tariff plans of US President-elect Donald Trump. Additionally, the markets appear to have entirely factored in an additional interest rate reduction by the Federal Reserve next week, which provides further support to the XAU/USD. In the interim, traders may choose to forgo placing aggressive directional wagers and instead remain on the sidelines in anticipation of the highly anticipated two-day FOMC policy meeting, which is scheduled to commence on Tuesday.

There is a lack of commitment among gold price advocates, who prefer to await indications regarding the Federal Reserve’s rate-cutting pathway.
US-supplied missiles have been launched by Ukraine, with the intention of striking strategic sites that are located deep within Russian territory. In the meantime, Russian forces are advancing toward the city of Pokrovsk in eastern Ukraine, which is of critical importance, following a month of intense combat. On Thursday, Israel declared that its military would remain in the Syrian territory it had occupied until a new force was established that satisfied its security requirements and filled the void left by the Syrian regime’s collapse.

This signifies a substantial increase in geopolitical tensions and directs some haven flows toward the gold price in anticipation of the Federal Reserve’s decision to reduce borrowing costs at the conclusion of the December meeting. The markets appear to have fully priced in a 25 basis points Fed rate cut move next week, as the most recent US consumer inflation figures released on Wednesday did not provide any significant upside surprises..
On Thursday, the US Bureau of Labour Statistics announced that the headline Producer Price Index (PPI) increased by 0.4% in November, and the annual rate increased from 2.6% in October to 3% during the reported month.

The annual core PPI increased by 0.2% in November and was 3.4% higher than it was during the same period last year. This exceeded expectations and suggests that the progress toward reducing inflation to the 2% target has reached a plateau.
This is in addition to the anticipation that US President Donald Trump’s expansionary policies will increase inflation and indicates that the Federal Reserve will proceed with a more circumspect approach to interest rate reductions in the future.

The US Treasury bond yields are being pushed higher by expectations of a less dovish Federal Reserve, which is helping the US Dollar maintain its weekly gains and reach a new monthly high. This could potentially limit the lower-yielding yellow metal.
Investors eagerly anticipate the critical FOMC policy decision next week in order to obtain insights regarding the United States’ interest rate outlook. This will stimulate the demand for USD and give the XAU/USD a substantial boost.

The gold price may experience additional declines if the $2,675 pivotal support is decisively breached. Technically, any additional recovery above the $2,700 level is expected to encounter resistance in the $2,725-26 region or the monthly high reached on Thursday. The subsequent upward movement has the potential to propel the Gold price to the $2,735 intermediate hurdle, as it advances toward the $2,748-2,750 supply zone. The subsequent pertinent barrier is located in the $2,775 region, above which bulls may attempt to challenge the all-time high, which was reached in October in the $2,800 neighborhood.

Conversely, the $2,675-2,674 region appears to have emerged as an immediate, robust support. However, a significant decline below this level could potentially trigger technical selling and open the door to additional losses in the direction of the $2,658-2,656 confluence, which is defined by the 50- and 200-period Simple Moving Averages (SMAs) on the 4-hour chart. The latter should function as a critical pivotal point, and if it is decisively breached, the gold price could be susceptible to further deterioration, potentially leading to the $2,632-2,630 region and the $2,600 round-figure mark.