Gold price weakens further to $2,625 area, tests 100-day SMA amid elevated US bond yields

• Gold price turned lower for the second straight day on Monday, though the downside seems limited.
• The Fed’s hawkish signal remains supportive of elevated US bond yields and exerts some pressure. 
• Geopolitical risks and trade war fears might continue to offer support to the safe-haven XAU/USD.

Gold price (XAU/USD) extends Friday’s retracement slide from the $2,665 area, or a nearly three-week top and remains under heavy selling pressure for the second straight day at the start of a new week. The downward trajectory drags the commodity to a fresh daily low, around the $2,625 region during the early European session and is sponsored by the Federal Reserve’s (Fed) hawkish shift. In fact, the Fed signaled that it would slow the pace of rate cuts in 2025. This remains supportive of elevated US Treasury bond yields and drives flows away from the non-yielding yellow metal.

Apart from this, a positive risk tone turns out to be another factor undermining the safe-haven Gold price. Meanwhile, the US Dollar (USD) bulls remain on the defensive below a two-year high touched last week and could offer some support to the commodity. Apart from this, geopolitical risks stemming from the Russia-Ukraine war and tensions in the Middle East, along with concerns about US President-elect Donald Trump’s tariff plans, should limit losses for the XAU/USD ahead of this week’s important US macro data, including the Nonfarm Payrolls (NFP) on Friday. 

Gold price is pressured by hawkish Fed-inspired elevated US bond yields

• The Institute of Supply Management (ISM) reported on Friday that the US Manufacturing PMI improved from 48.4 to 49.3 in December, pointing to signs of resilience and potential for growth.
• This comes on top of the prospects for a slower pace of rate cuts by the Federal Reserve in 2025 and remains supportive of elevated US Treasury bond yields, undermining the Gold price. 
• The yield on the benchmark 10-year US government bond reached its highest point since May 2 and assists the US Dollar in holding steady just below a two-year high touched last Thursday.
• San Francisco Fed President Mary Daly said on Saturday that despite significant progress in lowering price pressures over the past two years, inflation remains uncomfortably above the 2% target.
• Investors this week will confront the release of important US macro releases, including the closely-watched Nonfarm Payrolls report on Friday, ahead of the next Fed meeting later this month. 
• Israeli forces continued to attack medical facilities in the Gaza Strip and more Israeli raids were reported in the occupied West Bank on Sunday, while the Houthis have intensified their attacks on Israel.
• Ukraine said on Sunday that it had carried out surprise attacks against Russian forces in several areas in Kursk. The Russian Defence Ministry also confirmed the Ukrainian counterattacks.

Gold price bears flirt with 100-day SMA pivotal support

From a technical perspective, any subsequent slide is likely to find decent support near the 100-day Simple Moving Average (SMA), currently pegged near the $2,625 region. This is followed by the $2,600 mark, below which the Gold price could drop to the December monthly swing low, around the $2,583 area. Some follow-through selling will be seen as a fresh trigger for bearish traders and pave the way for deeper losses.

On the flip side, momentum beyond the Asian session high, around the $2,647 region, could lift the Gold price back to the $2,665 area, or the multi-week high. The subsequent move up could extend further towards an intermediate resistance near the $2,681-2,683 zone en route to the $2,700 mark. The latter should act as a pivotal point, which if cleared decisively will set the stage for an extension of a two-week-old uptrend.