Key Highlights:
- Gold reached an all-time high of $2,882.35 on Wednesday before retreating.
- Selling pressure emerged after U.S. Treasury Secretary Scott Bessent stated that the Trump administration aims to lower 10-year Treasury yields rather than push for Federal Reserve rate cuts.
- Gold (XAU/USD) is currently trading around $2,857, facing headwinds in Thursday’s Asian session.
Market Overview
Gold’s rally has stalled as investor sentiment shifts in response to comments from U.S. Treasury Secretary Scott Bessent, who clarified that the Trump administration is prioritizing a decline in long-term Treasury yields rather than advocating for Federal Reserve rate cuts. This unexpected stance has prompted profit-taking in gold, exerting downward pressure on prices.
Attention now turns to the Bank of England’s (BoE) monetary policy decision, where a 25 basis point (bps) rate cut to 4.50% is anticipated. This follows a cumulative 50 bps reduction throughout 2024. Additionally, speeches from Federal Reserve officials—including Governor Christopher Waller, San Francisco Fed President Mary Daly, and Dallas Fed President Lorie Logan—are scheduled for later on Thursday, setting the stage for Friday’s highly anticipated U.S. Nonfarm Payrolls report.
Market Drivers: Gold Faces Selling Pressure Amid Shifting Sentiment
Investor risk appetite has been influenced by geopolitical developments, with U.S. President Donald Trump reportedly exploring a new nuclear deal with Iran while proposing a plan to end the war in Ukraine. These efforts have eased geopolitical risks, leading investors to reduce their safe-haven positions in gold.
Meanwhile, the commodity market is rebounding from a two-year slump, driven by rising prices in precious metals and agricultural products. The Bloomberg Commodity Total Return Index, which tracks a diversified basket of 24 energy, metals, and agricultural futures, has climbed 5.9% year-to-date, reaching its highest level since late 2022—a year marked by post-COVID economic recovery and supply chain disruptions caused by the war in Ukraine.
Additionally, reports indicate that gold held in the Bank of England’s vaults is trading at a discount compared to the broader market. Concerns over potential Trump administration tariffs have fueled increased demand for bullion, resulting in weeks-long withdrawal delays, according to Reuters.
The Bank of England’s rate decision is expected at 12:00 GMT, with markets forecasting a 25 bps cut from 4.75% to 4.50%.
Technical Outlook: Gold Under Pressure as Risk Appetite Returns
Markets are rapidly adjusting to changing conditions, placing gold in a challenging position. Trump’s unexpected diplomatic approach has increased risk-taking sentiment, leading investors to shift away from safe-haven assets like gold. This downward pressure is likely to persist unless new developments reignite demand for bullion.
Key Technical Levels:
- Support Levels: Initial support is seen at $2,843 (S1), followed by $2,820 (S2). A deeper correction could bring prices down to $2,790, the previous high from October 31, 2024.
- Resistance Levels: Immediate resistance is at $2,886 (R1), just above the current all-time high. If bullish momentum resumes, the next key level to watch is $2,900, with further resistance at $2,905 (R2).
Conclusion
Gold’s short-term trajectory will depend on shifting market narratives, Federal Reserve commentary, and upcoming macroeconomic data releases. With geopolitical risks easing and a more risk-on market sentiment prevailing, gold faces continued selling pressure in the near term.
A.Naderi
