A combination of factors weighs on gold
At the start of the European session, the gold price is hovering around the $2,680 zone, in the grip of bearish momentum. The renewed vigor of US dollar (USD)fueled by an optimistic economic outlook in the United States, plays a key role in this trend. While investors anticipate measures favorable to economic growth, safe haven assets like gold are suffering the consequences.
Bond Yields and the Fed's Outlook
US bond yields are falling, thus limiting investors' appetite for the dollar. However, the recent reduction in key rates from the Federal Reserve (Fed) continues to weigh. This decision, combined with the absence of clear indications of a pause in monetary easing, fuels speculation about further cuts in December. According to the CME Group, markets are pricing in a further rate cut with a 75% probability, which could further impact yields and support gold in the near term.
Market movements after the Trump election
The victory of Donald Trump has reignited debates on potentially inflationary economic policies. Such an orientation could restrict the Fed's room for maneuver in terms of interest rates. At the same time, hopes for additional economic stimulus in China are keeping markets optimistic, reducing the appeal of safe havens.
Technical analysis: critical thresholds to monitor
From a technical point of view, the gold price appears to be hesitating below the resistance level at $2,718, corresponding to the 50% Fibonacci retracement level. A breach of this point could push the price towards $2,734 and beyond, to the $2,758–$2,790 zone, close to the record reached at the end of October.
Conversely, a break of the immediate support at $2,672 could lead to a decline towards $2,660 or even lower, around $2,605, corresponding to the October monthly lows. Technical indicators are showing a loss of positive traction, which could signal a resumption of bearish pressures.
Frequently asked questions: Interest rates and their effects
What are interest rates?
Interest rates refer to the cost of borrowing or the return on deposits, influenced by the decisions of central banks. These institutions adjust their rates to keep inflation stable, usually around 2%. In the event of inflationary overheating, central banks raise rates to curb demand.
How do interest rates influence currencies?
Higher interest rates attract foreign investors, thereby strengthening the relevant currency. This makes it a determining factor for the evolution of the main world currencies.
How do interest rates impact the price of gold?
Gold, as a non-earning asset, is often less attractive when interest rates rise. Additionally, a strong dollar — helped by high rates — makes gold more expensive for foreign buyers, putting downward pressure on its prices.
What is the federal funds rate?
This is the rate at which American banks lend to each other in the very short term. This rate, set by the Federal Reservedirectly influences monetary conditions in the United States. Expectations surrounding its development are closely monitored by the markets, in particular via the CME's FedWatch tool.
Faced with the contradictory forces of US monetary policy and global trends, the gold price remains particularly volatile. Investors will continue to carefully monitor the Fed's decisions and economic signals, in a context where the dollar is asserting itself as a central player in the markets.
