Gold extends losses on higher US yields and a strong Dollar

• Gold fails at $2,665 and resumes its near-term bearish trend as the US Dollar picks up.
• Investors’ concerns about a “hawkish cut” by the Fed on Wednesday are buoying US Treasury yields
• XAU/USD remains under pressure, approaching support at the $2,630 area.

Gold’s (XAU/USD) upward movements have been brief. On Tuesday’s European session, the precious metal retreated further, influenced by a robust US Dollar (USD) and rising US Treasury yields. The preliminary US S&P Global Purchasing Managers Index (PMI) figures released on Monday were stronger than anticipated, which supports the notion of consistent US growth in the fourth quarter and suggests a gradual Federal Reserve (Fed) easing in 2025.
It is anticipated that the US Retail Sales report will indicate that consumption remained robust in November later today. In this context, investors remain optimistic that the Federal Reserve will reduce rates on Wednesday; however, they anticipate hawkish forward guidance. This is increasing the yields on US Treasury securities and depressing the value of gold.

Gold experiences a decline amid expectations of a more dovish Federal Reserve

• Gold’s value is declining as interest in the Middle East conflict diminishes, at least for the time being. The US Federal Reserve commences its two-day monetary policy meeting today, and the attention now turns to this institution.
• The CME Group’s FedWatch Tool indicates that futures markets are nearly entirely pricing a 25 basis point interest rate reduction on Wednesday. However, there is less than a 30% likelihood of more than two quarter-percentage point reductions in 2025.
• US data from Monday indicated that the services sector’s business activity expanded more rapidly than anticipated in December, indicating that the economy has continued to expand at a healthy pace in the fourth quarter.
• US Retail Sales are anticipated to increase by 0.5% in November, compared to 0.4% in the previous month. This implies that consumption, which comprises 65% of the Gross Domestic Product (GDP), will generate a positive impact in Q4.

Analysis of technical aspects: Pressure is exerted on the XAU/USD pair, with the $2,630 support level receiving attention

Following the rejection of the $2,720 resistance area last week, gold continues to decline. The bearish engulfing candle from last Thursday and the potential double top at the aforementioned level are fostering optimism among sellers. An increasing adverse momentum is indicated by the negative candle on the 4-hour chart. Despite the fact that the pair may find some support in the $2,630 area (December 9 low), the primary downside target is the lows of November 25, 26, and December 6 at approximately $2,610. Conversely, the intra-day level at $2,690 and Monday’s high at $2,665 serve as resistances.