Gold prices fell sharply on Thursday, retreating by 0.85% to $2,626 as rising U.S. Treasury yields weighed on the precious metal. Traders were also cautious ahead of the U.S. Department of Labor’s release of November’s Nonfarm Payrolls report.
The dip in gold came as U.S. bond yields climbed, prompting investors to trim expectations for a 25 basis point rate cut by the U.S. Federal Reserve at its upcoming December meeting. The increase in Treasury yields, particularly in the 10-year bond, dampened the appeal of non-yielding gold.
Earlier in the week, mixed economic data added to market uncertainty. Initial jobless claims for the week ending November 30 rose by 9,000 to 224,000, surpassing the expected 215,000. Meanwhile, the U.S. Bureau of Economic Analysis reported a narrowing of the trade deficit in October, which fell to $73.8 billion from $83.8 billion in September.
Federal Reserve Chair Jerome Powell’s comments on Wednesday also capped gold’s price gains. Powell expressed confidence in the strength of the U.S. economy, stating, “I feel very good about where the economy is and where monetary policy is.” He suggested that the Fed could afford to take a more cautious approach as it seeks to find a neutral stance on interest rates.
Despite this, data from the CME FedWatch Tool still shows a 70% probability of a rate cut at the December 17-18 Fed meeting. However, the mixed economic data and Powell’s cautious tone left investors uncertain about the central bank’s next move. The release of U.S. inflation data next week is expected to offer further clarity.
In other market news, the U.S. Dollar Index, which tracks the greenback against a basket of six currencies, fell 0.51% to 105.80. Real U.S. yields edged up by 1 basis point to 1.91%, while the 10-year Treasury yield rose to 4.18%.
Technical analysts are noting that gold prices have consolidated within a narrow range between $2,600 and the 50-day simple moving average (SMA), which is currently at $2,667. If gold falls below the $2,600 mark, it could test further support around $2,580 and $2,536. On the upside, a rebound above $2,650 could see the price rise to the 50-day SMA, with the next significant resistance at $2,700 and a potential peak at $2,790.
As traders await the upcoming Nonfarm Payrolls and University of Michigan Consumer Sentiment data, the outlook for gold remains clouded by rising yields and ongoing uncertainty about the Fed’s next steps.
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