Gold price advances closer to $2,600 on geopolitical risks, subdued USD price action – FXStreet

• Gold prices gained some positive traction on Monday, snapping a six-day losing streak.
• Geopolitical risks benefit safe-haven XAU/USD as USD demand weakens.
• The Fed's aggressive rate cuts and bets on higher Treasury yields will limit further gains.

Gold prices (XAU/USD) have shaved off some of their modest intraday gains to remain below $2,600 heading into Monday's European trading. U.S. Treasury yields remain elevated on expectations that President-elect Donald Trump's expansionary policies will push up inflation and limit the Federal Reserve's room for further interest rate cuts. This, along with generally positive risk trends, has proven to be a key factor acting as a headwind for the unyielding yellow metal.

That said, the risk of further escalation in geopolitical tensions has provided some support for the price of safe-haven gold. Additionally, the US dollar (USD) remains defensive below its year-to-date price hit last Thursday, further providing a tailwind for XAU/USD, which appears to have ended its six-day losing streak for now. However, the lack of follow-through buying warrants some caution before determining whether there is further recovery from last week's two-month low in the $2,537-$2,536 range.

Gold prices are supported by a variety of factors, but bulls remain cautious as U.S. Treasury yields rise

• Gold prices suffered their biggest weekly decline since September 2023, falling to their lowest in more than two months last week as the US dollar recently strengthened to its highest in more than a year.
• Geopolitical developments over the weekend encouraged capital flows into several havens and helped the precious metal gain strong positive traction during the Asian session at the beginning of the new week.
• US President Joe Biden has authorized Ukraine to use long-range missiles supplied by the US to strike deep inside Russia, which is sending North Korean troops to step up the war.
• At least eight people were killed in a Russian attack on a nine-story building in the northern city of Sumy. Russia has also launched large-scale drone and missile attacks targeting energy infrastructure.
• Israeli forces continued their military operation in Lebanon on Saturday after killing at least 111 Palestinians in the Gaza Strip and assassinating Hezbollah's media chief Mohammad Afif.
• Investors now appear confident that President-elect Donald Trump's tariff plans and debt-financed tax cuts could stimulate inflation and delay the Federal Reserve's rate-cutting cycle.
• Federal Reserve Chairman Jerome Powell said last Thursday that with a resilient economy, strong job market and inflation still above its 2% target, there was no need to rush to cut interest rates.
• Boston Fed President Susan Collins said in an interview that while another rate cut in December is being considered, it is not a “done deal” and there is no preset path for monetary policy.
• Separately, Chicago Fed President Austan Goolsby said that as long as the central bank continues to move toward its 2% inflation target, interest rates will likely be significantly lower than they are now.
• Benchmark 10-year U.S. Treasury yields are holding steady near multi-month highs, favoring U.S. dollar bulls and potentially capping gains in the low-yielding yellow metal.

If gold prices sustainably fall below the $2,537-$2,536 confluence, it should pave the way for further losses.

From a technical perspective, the recent sharp pullback from all-time highs stalled around the 50% retracement level of the June-October bull market. The above support near $2,536-$2,535 coincides with the 100-day simple moving average and should serve as an important key point going forward. A convincing breakout will be seen as another trigger for bearish traders, paving the way for further losses. A subsequent decline could pull gold prices further toward the psychological mark of $2,500 on its way to 61.8% Fibonacci. Levels around $2,480.

Conversely, any subsequent strength above the $2,600 mark (38% Fibonacci level) could face stiff resistance and remain capped around the $2,620-$2,622 area. However, some follow-through buying could trigger a short-covering rally towards the $2,655-$2,657 congestion zone, or the 50-day SMA, on its way to the $2,672-2,673 region (23.6% Fibonacci level). There is a gender. A sustained move above the latter could shift the bias in favor of the bulls and allow gold prices to regain the $2,700 round figure.