Gold prices have gained positive traction for a third consecutive day, recovering from a one-month low reached last Thursday. The precious metal continued its upward momentum during the early part of the European session, supported by haven flows driven by escalating geopolitical tensions and concerns over trade wars. However, a more favorable risk sentiment is acting as a counterbalance, preventing a more pronounced rally in gold.
Despite the positive movement in gold, the Federal Reserve’s hawkish stance continues to weigh on the commodity. Higher US Treasury bond yields, a result of the Fed’s tightening signals, have strengthened the US Dollar (USD), attracting some dip-buying on Monday. This has further capped gold’s gains, prompting traders to exercise caution and await stronger buying momentum before anticipating further price increases. Investors are now focused on the Conference Board’s Consumer Confidence Index, which could provide fresh market direction later today.
Geopolitical Tensions Support Gold, But Dollar Strength Limits Price Gains
Gold has continued to find support from ongoing geopolitical risks. The US Dollar experienced a pullback from a two-year high last Friday following the release of the US Personal Consumption Expenditure (PCE) Price Index, which showed signs of inflation moderation. According to the US Bureau of Economic Analysis (BEA), inflation as measured by the PCE Price Index rose slightly to 2.4% on a yearly basis in November, up from 2.3% in October. Meanwhile, the core PCE, which excludes volatile food and energy prices, increased 2.8%, matching October’s pace but falling short of the anticipated 2.9% rise.
Personal income growth decelerated sharply in November, registering a 0.3% increase, down from 0.7% in October. At the same time, consumer spending showed modest growth, rising 0.4% after a downward revision to October’s figure.
Geopolitical tensions also remain a key factor supporting gold. Russian President Vladimir Putin has vowed retaliation following a major drone attack by Ukraine on Kazan, which damaged residential areas and disrupted the local airport. Meanwhile, Israeli airstrikes on the Gaza Strip have led to further casualties, with at least seven Palestinians killed in southern Gaza, pushing the death toll to over 50 in the past 24 hours.
The Federal Reserve’s recent signaling that it will slow the pace of rate cuts in 2025 has also contributed to the rise in US Treasury bond yields, which reached their highest levels in over six months last week.
Looking ahead, the release of the Conference Board’s Consumer Confidence Index later today could provide additional market impetus, potentially influencing gold prices in the early North American session.
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