Gold (XAU/USD) has pulled back slightly from its intraday highs, hovering around the $2,620 mark during Tuesday’s European session. Despite the dip, the yellow metal remains on track for its second consecutive day of gains, supported by a mix of market dynamics.
The US Dollar (USD) has attracted some dip-buying interest, pausing its recent slide from last week’s year-to-date highs. This recovery is underpinned by expectations of a less dovish Federal Reserve (Fed), signaling the possibility of tighter monetary policy. Additionally, the upbeat sentiment in equity markets poses a challenge for gold, a non-yielding asset, by reducing its appeal as a safe-haven investment.
Market sentiment is also shaped by expectations that expansionary fiscal policies under the upcoming administration of US President-elect Donald Trump could stoke inflation. This, in turn, might limit the Fed’s capacity to implement further interest rate cuts, keeping US Treasury yields elevated and adding another layer of resistance to gold’s upward trajectory.
However, geopolitical uncertainties remain a key factor supporting gold prices. The prolonged Russia-Ukraine conflict and ongoing tensions in the Middle East continue to underpin demand for the safe-haven metal. These risks caution traders against making aggressive bearish bets, as gold retains its allure during times of global uncertainty.
Investors will need to carefully weigh these opposing forces in the coming days, as gold navigates a complex landscape of market drivers.
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