Gold price has had an impressive year so far; recording monthly gains in eight out of the past ten months. Since the beginning of the year, the precious metal has risen by close to 30%; hitting multiple record highs in recent months.
Notably, its bullish outlook for the medium and long term persists. However, a stronger US dollar continues to limit its short term gains. Indeed, it is its main headwind as November appears set to mark gold’s third month in the red this year.
Gold holds steady despite Israel’s ceasefire deal
Geopolitical uncertainties have been one of gold’s bullish factors for the better part of the year. In fact, the Russia-Ukraine war and Israel-Hamas war have largely contributed to this year’s eight months of gains for the precious metal.
Gold price appears to record its third month of losses this year in November. In fact, it has been in the red for two of the past three weeks and appears set to record the month’s third week of losses. However, even with the enactment of Israel’s ceasefire deal, geopolitical risks remain a bullish factor for the lustrous metal.
On Monday, gold price dropped by over $90 on news of a ceasefire between Israel and the Iran-backed Hezbollah group in Lebanon. As stated by the US President Joe Biden, the deal will have the Israeli military withdraw from Lebanon within a period of 60 days. At the same time, the Lebanese army is set to be in charge in the country’s southern region to deter Hezbollah from regaining control of the area.
The news by itself seemed to ease the geopolitical risk and gold’s safe haven demand by extension. However, even with the decline, prices remained steady above the crucial resistance-turn-support zone of $2,600 per ounce. Besides, as the ceasefire took effect on Wednesday (02:00 GMT), gold price reversed some of the week’s previous losses; trading in the green for the second day in a row.
Notably, the market remains keen on the situation in the Middle East. Furthermore, the Russia-Ukraine war , which has the West at the center of it all, has investors hesitant to short gold. On Tuesday, Russia launched its largest ever drone attack on Ukraine. Besides, Russia is said to be advancing at its fastest rate since invading Ukraine in 2022.
Softer US Dollar, Treasury Yields Bolster Gold Price
A strong US dollar has been gold’s main headwind in recent weeks. In fact, as the markets responded to a Trump win earlier in November, the greenback’s two-year high and rising Treasury yields had the precious metal reach a two-month low. Higher US bond yields increase the opportunity cost of holding the non-yielding bullion.
In addition to the dollar’s safe-haven demand, concerns over Trump’s policies bolstered the Treasury yields and greenback. Investors were concerned that increased deficit spending and hefty import tariffs would reignite the US inflation further above the Fed’s target of 2%.
However, Trump’s selection of Scott Bessent as his government’s Treasury Secretary has eased those concerned. The markets view him as a fiscal conservative who will offer a moderate approach to tariffs in addition to keeping a leash on the country’s deficit spending. The subsequent easing of the Treasury yields and dollar have boosted gold price in the short term.
What’s more, in the FOMC meeting minutes released on Tuesday, the Fed officials expressed confidence in the performance of the US economy even though inflation remains above its 2% target. With a strong labor market and easing inflation, the officials acknowledged that “it would likely be appropriate to move gradually toward a more neutral stance of policy over time”.
While most economists bet that the Fed will take a more gradual approach on its rate cut path in 2025, the market is still pricing a 25 basis points cut during the Fed’s December meeting. Overall, an environment of lower interest rates lowers the opportunity cost of holding the bullion.
Gold price analysis
The daily chart shows that the price of gold has remained in a volatile market in the past few weeks. This price action happened as investors anticipated the next action by the Federal Reserve and Donald Trump.
On the daily chart, gold remains below the lower side of the rising wedge shown in orange. In most periods, this wedge is one of the most bearish chart patterns in the market. Gold remains above the 50-day and 100-day Exponential Moving Averages (EMA).
Gold price will likely remain in this consolidation in a while. More gains will be confirmed if the coin moves above the key resistance level at $2,730. If this happens, it means that gold could jump and retest its all-time high. On the flip side, a drop below the point at $2,538 will point to more weakness.
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