gold prices hovered just above $2,700 on Friday, as traders awaited the University of Michigan’s Consumer Sentiment data. The US Dollar steadied amid a pause in declining Treasury bond yields, with the market trying to assess the implications of Trump’s electoral victory and the recent rate cut by the Federal Reserve.
Following a significant drop of over 3% on Wednesday spurred by Trump’s win, gold prices made a modest recovery. The market appeared to be in a struggle between the influence of fiscal policies associated with Trump and the monetary easing from the Fed. On Friday, gold consolidated around $2,700 during Asian trading hours, as investors reflected on the recent market volatility.
The aftermath of Trump’s election raised concerns that his administration’s proposed policies might heighten inflation, supporting a rise in the US Dollar and Treasury yields at gold ’s expense. On Thursday, however, gold prices rebounded as traders took profits on long positions in the US Dollar ahead of the Fed’s interest rate decision, which also provided new upward momentum for gold during American trading sessions after the dollar weakened.
Despite an initial bounce in the Dollar following the Fed’s decision to lower the federal funds rate by 25 basis points to a range of 4.50% to 4.75%, any gains were quickly undone by Chairman Powell’s comments indicating a continuation of the central bank’s easing strategy, which diminished the dollar’s allure as a safe-haven asset.
Looking ahead, upcoming consumer sentiment and inflation data are expected to affect both the US Dollar and gold prices. Traders might adjust their positions following a volatile week, especially as they prepare for the forthcoming Consumer Price Index data. Technical indicators also suggest that gold remains at a critical juncture, with significant support at $2,641 and resistance at $2,718. A breach below $2,695 could signal further declines, whereas strength above $2,718 might lead to upward momentum toward $2,760 and beyond.
