Gold price hits two-week top despite bullish USD and rising bond yields

• Gold price scales higher for the fifth straight day and touches a nearly two-week high on Friday
• The worsening Russia-Ukraine conflict continues to drive haven flows toward the XAU/USD
• Bets for a less dovish Fed, elevated US bond yields, bullish USD does little to hinder the move up

During the Asian session on Friday, the gold price (XAU/USD) reached a two-week high and has continued to attract haven flows for the fifth consecutive day in the face of the intensifying Russia-Ukraine conflict. The commodity, which is regarded as a hedge against inflation, is currently seeking to reclaim the $2,700 range in anticipation of the potential reignition of inflationary pressures by US President-elect Donald Trump’s expansionary policies.

In contrast, the supporters of the XAU/USD pair appear to be unconcerned by the extension of the US Dollar (USD) rally to its highest level since October 2023, which occurred following the US election. Additionally, speculations that the Federal Reserve (Fed) may be constrained in its ability to further reduce interest rates due to increased inflation continue to favor elevated US Treasury bond yields, although they do little to impede the Gold price’s ongoing upward trajectory.

• The purchase of gold continues unabated in response to the escalating conflict between Russia and Ukraine.
• The Gold price continued to rise for the fifth consecutive day on Friday, despite a robust US Dollar, as a result of the mounting tensions between Russia and Ukraine.
• In response to Ukraine’s utilization of missiles manufactured in the United States and the United Kingdom in assaults against Russian targets, Russian forces launched a new intermediate-range ballistic missile.
• In anticipation of a less dovish Federal Reserve, the USD Index, which monitors the Greenback against a basket of currencies, reached its highest point since October 2023.
• Investors continue to harbor concerns that the policies of US President-elect Donald Trump could rekindle inflation and necessitate the Federal Reserve to reduce its rate-cutting pace.
• Recently, a number of influential FOMC members, including Fed Chair Jerome Powell, issued warnings regarding inflationary disruptions and advised against additional policy easing.
• The CME Group’s FedWatch Tool indicates that traders are estimating a 55% likelihood that the Federal Reserve will reduce financing costs by 25 basis points in December.
• In the interim, Chicago Fed President Austan Goolsbee stated that inflation is approaching 2% and that it may be prudent to reduce the rate of interest rate reductions. Additionally, New York Fed President John Williams observed that the labor market is in equilibrium and does not exert any upward pressure on inflation.
• US Weekly initial jobless claims decreased by 6,000 last week to 213K, a seven-month low, compared to the anticipated reading of 220,000.
• US Existing Home Sales experienced a significant rebound in October, recording their first annual increase since mid-2021, following a decline in September to their lowest level since October 2010.
• The Philly Fed Manufacturing Index revealed that manufacturing activity in the Philadelphia region unexpectedly contracted in November, dropping from +10.3 to -5.5.
• The XAU/USD is expected to receive a new impetus following the release of flash PMIs on Friday, which will offer a fresh perspective on the global economy’s health.
  Gold price bulls may now postpone posting new wagers until the price surpasses $2,700.

The overnight breakout above the $2,665 confluence, which is the 50% retracement level of the recent pullback from the all-time peak and the 100-period Simple Moving Average (SMA) on the 4-hour chart, was regarded as a critical catalyst for investors. Furthermore, the daily chart’s technical indicators have resumed their upward trajectory, which suggests that the gold price may continue to appreciate.

Therefore, it is feasible that there may be some follow-through strength beyond the $2,700 threshold, toward the $2,710-2,711 supply zone. Reaffirming the positive bias and propelling the XAU/USD toward the next pertinent obstacle in the $2,736-2,737 region, acceptance above the aforementioned barriers will be necessary.

Conversely, the $2,665 confluence hurdle breakpoint may now serve as a safeguard against the immediate downside, which is situated prior to the $2,635-2,634 region or the 38.2% Fibonacci retracement level. This is succeeded by the $2,622-2,620 intermediate support and the $2,600 round figure. A significant decline below the latter could render the Gold price susceptible to an acceleration of its decline toward the 100-day SMA, which is located in the $2,560 region, and the swing low from last week, which is located in the $2,537-2,536 area.

The bias will shift back in favor of bearish speculators and create the conditions for even more substantial losses if the aforementioned support levels are not defended.