Article by: ETO Markets
Gold prices fell sharply from a three-week high on Monday and are now fluctuating around the mid-$2,600 region, ending a five-day winning streak. The main driver was improved risk sentiment, as US President-elect Trump nominated Scott Bessent as Treasury Secretary, easing market concerns about policy uncertainty. In addition, reports that Israel and Lebanon's Hezbollah were close to reaching a ceasefire agreement further boosted investor confidence.
At the same time, the market expects that Trump's economic policies may trigger inflationary pressures, which limits the Fed's room for further rate cuts, thereby suppressing the price of non-yielding gold. However, the significant decline in US Treasury yields after Bessent's nomination and the dollar's pullback from a two-year high have provided some support for gold's decline. This week, the focus of the market will include the minutes of the Federal Reserve's November meeting and the core PCE data, which will provide more guidance on the path of monetary policy.
From a technical perspective, the price of gold has fallen below the 23.6% Fibonacci retracement level ($…) during the pullback and is approaching the 100-period simple moving average (SMA) at $…-$…. If the price continues to fall below the key support level of $… (38.2% Fibonacci retracement level and 100-period SMA), it may further decline to $… (50% Fibonacci retracement level) and $…-$… area (61.8% Fibonacci retracement level). On the contrary, if the price re-breaks $… and holds, it may rise to test the psychological level of $… and the short-term resistance area of $…-$…, with further upside targets of $… and the all-time high of $….
