The price of gold (XAU/USD) continues to face downward pressure as it trades around the $2,175 region, below the record high reached the previous day, heading into the European session on Friday. The US Dollar (USD) has strengthened, building on an overnight solid bounce from a one-week low, buoyed by an optimistic outlook for the US economy. This, coupled with elevated US Treasury bond yields and a bullish tone in global financial markets, has contributed to undermining the safe-haven appeal of the precious metal.
Despite the downward pressure, any significant corrective decline for the gold price appears to be limited. This is due to the Federal Reserve’s (Fed) projection of a less restrictive policy stance, with indications of potential interest rate cuts totaling 75 basis points this year. As a result, US bond yields have been dragged lower, which could restrict gains for the Greenback and provide support to the non-yielding gold price. Consequently, market participants are advised to await strong follow-through selling before confirming whether the XAU/USD has peaked and considering any further downside moves.
Looking ahead, traders are eagerly anticipating Fed Chair Jerome Powell’s scheduled speech during the early North American session for fresh market insights. Additionally, movements in US bond yields will influence the dynamics of the USD price, alongside broader risk sentiment. This should provide traders with opportunities to capitalize on short-term fluctuations around the gold price. Despite the current pressure, the XAU/USD remains poised to conclude the week positively for the fourth time in the last five weeks.
