Gold (XAU) Price Forecast: Bearish Trend as Dollar Strength, Rising Yields Weigh

Gold Prices Edge Lower on Strong Dollar and Treasury Yields

Gold prices continued their decline on Tuesday, marking a third consecutive session of losses. The yellow metal faces selling pressure after dropping below the 50-day moving average of $2,648.07, which now acts as a new resistance level. Currently trading near $2,604.39, gold finds itself on the edge of further declines, with the $2,546.86 – $2,538.50 range presenting a potential target should downward momentum persist.

At 11:25 GMT, XAU/USD is trading $2596.35, down $23.24 or -0.89%.

US Dollar Gains and Rising Treasury Yields Pressure Gold

The U.S. dollar’s recent surge is adding downward pressure on gold prices. As the dollar index rose to a four-month high on Tuesday, demand for non-yielding assets like gold has diminished. The dollar’s strength is being bolstered by investor optimism about the potential economic effects of the Trump administration’s upcoming policies. Analysts note a renewed correlation between a strong dollar and weaker gold prices, a trend that had lessened earlier this year but has since intensified post-election.

U.S. Treasury yields have also risen in response to the anticipation of fiscal expansion policies under Trump, which could keep interest rates elevated. The Fed recently cut rates by 25 basis points, and while traders currently expect another cut in December, high Treasury yields reflect skepticism around long-term dovish policy, especially if Trump’s economic plans spur inflation. Higher yields create additional headwinds for gold, as they raise the opportunity cost of holding non-yielding assets.

Investor Focus on Key Economic Data and Fed Comments

Traders are closely monitoring key U.S. economic data releases this week, including the October Consumer Price Index (CPI) on Wednesday, the Producer Price Index (PPI) on Thursday, and retail sales data on Friday. These reports will provide insights into inflation trends and economic strength, potentially influencing the Fed’s policy path. Additionally, comments from Fed Chair Jerome Powell and other Federal Reserve officials this week could further clarify the Fed’s stance on interest rates, adding to market sensitivity.

Physical Demand May Support Gold as Prices Near Key Levels

UBS analyst Giovanni Staunovo suggests that gold may find support between $2,500 and $2,600 per ounce as prices approach these levels, where a pickup in physical demand could help counterbalance recent selling pressure. The potential for increased buying interest among jewelers and central banks could help stabilize prices in the short term, although market sentiment remains cautious due to broader economic factors.

Short-Term Forecast: Bearish Outlook

Given the current bearish momentum, gold prices appear vulnerable to further declines in the near term. The strong dollar, rising Treasury yields, and an attractive equity market continue to draw capital away from gold.

If gold breaks below $2,600 without encountering significant buying interest, a retest of support near $2,540 could occur. Overall, unless there is a shift in dollar strength or economic data that challenges inflation expectations, the near-term outlook for gold remains bearish.