HG MARKETS:

Gold prices (XAU/USD) declined for the second consecutive day on Monday, retreating further from the nearly three-week high reached on Friday. Despite an intraday uptick to the $2,647-$2,648 range earlier in the day, the metal faced selling pressure. The Federal Reserve’s hawkish stance, signaling a slower pace of interest rate cuts in 2025, continued to support elevated US Treasury bond yields. This development prompted a shift away from the non-yielding yellow metal. Additionally, an overall positive risk sentiment contributed to the weakness in the safe-haven asset.

The ongoing pullback in the US Dollar (USD), which recently retreated from its highest level since November 2022, coupled with geopolitical risks and trade war concerns, could limit Gold’s downside. Market participants are also exercising caution ahead of critical US macroeconomic releases this week, including the Nonfarm Payrolls (NFP) report on Friday. The December FOMC meeting minutes, scheduled for release on Wednesday, are expected to play a crucial role in shaping short-term USD dynamics and influencing XAU/USD price movements.

The Institute of Supply Management (ISM) reported on Friday that the US Manufacturing PMI rose from 48.4 to 49.3 in December, reflecting resilience and potential for growth. This, combined with the Fed’s prospects for a slower pace of rate cuts in 2025, has sustained elevated US Treasury bond yields, weighing further on Gold prices. The benchmark 10-year US government bond yield climbed to its highest level since May 2, helping the US Dollar maintain stability near last Thursday’s two-year high. Meanwhile, San Francisco Fed President Mary Daly noted on Saturday that despite notable progress in reducing price pressures over the past two years, inflation remains well above the Fed’s 2% target.

Investors are focusing on this week’s key US macroeconomic data, including the NFP report on Friday, as well as the upcoming Federal Reserve meeting later this month. Geopolitical tensions remain in focus, with Israeli forces continuing attacks on medical facilities in Gaza, escalating raids in the occupied West Bank, and intensified Houthi offensives against Israel. Simultaneously, Ukraine reported surprise counterattacks on Russian forces in Kursk, a development confirmed by the Russian Defense Ministry.

From a technical standpoint, further declines in Gold prices are expected to find solid support around the 100-day Simple Moving Average (SMA), near the $2,625 level. Below this, the $2,600 mark and the December monthly swing low at approximately $2,583 could act as additional support zones. A sustained breach of these levels could trigger further selling pressure and open the door for deeper losses.

Conversely, a move beyond the Asian session high near $2,647 could push Gold prices toward the $2,665 level, which aligns with a recent multi-week high. Further bullish momentum could drive prices toward the $2,681-$2,683 resistance zone, with the $2,700 mark acting as a critical pivot point. A decisive break above this level would pave the way for an extension of Gold’s two-week uptrend.