The gold price (XAU/USD) experienced a downturn, reaching a one-and-a-half-week low on Wednesday due to increased US Treasury bond yields and a stronger US Dollar (USD). However, a shift occurred as US bond yields retreated following the December 12-13 Federal Open Market Committee (FOMC) meeting minutes, revealing a consensus among policymakers that inflation is under control and concerns about economic downside risks associated with an overly restrictive stance.
Geopolitical uncertainties and concerns over China’s economic challenges provided a boost to the safe-haven precious metal, attracting buyers near the $2,030 area and generating follow-through traction on Thursday.
While the USD faced some selling pressure, temporarily stalling its four-day recovery trend from a multi-month low, it continued to support the US Dollar-denominated Gold price. Investor uncertainty persists regarding the timing of potential interest rate cuts by the Federal Reserve (Fed). Richmond Fed President Thomas Barkin’s remarks on possible rate hikes added to the caution, resulting in a modest uptick in US Treasury bond yields, acting as a headwind for gold.
Investors remain hesitant, seeking more clarity on the Fed’s policy outlook, with attention focused on the upcoming release of the US Nonfarm Payrolls (NFP) on Friday. Meanwhile, Thursday’s US economic docket, featuring the ADP report on private-sector employment and Initial Jobless Claims, will offer short-term trading opportunities during the early North American session.
Despite mixed fundamentals, caution is advised before placing fresh directional bets on the gold price. Strong follow-through buying is deemed necessary to confirm the end of the one-week downtrend and position for potential intraday appreciation in XAU/USD.
