Gold Price Dropped Below $2,650 as US Dollar Rises on Trump Tariff Threat

Gold price dropped on Monday, snapping a four-day winning streak, as the U.S. dollar staged a sharp rally and investors braced for pivotal economic data and Federal Reserve insights on the path of interest rates.

Gold prices saw some buying during the Asian session on Tuesday, driven by a resurgence in demand due to Trump's tariff threats and ongoing geopolitical uncertainty. However, XAU/USD remains within a familiar range as traders eagerly anticipate key U.S. macroeconomic releases this week for insights into the Fed's potential rate-cut strategy.

Gold price technical analysis

From a technical perspective, XAU/USD remains within familiar levels, struggling to establish a clear direction. On the daily chart, the pair hovers around a mildly bearish 20 Simple Moving Average (SMA), while the 100 and 200 SMAs maintain their bullish slopes well below the current price. Technical indicators, however, have flattened near their midlines, reflecting the lack of a distinct trend.

In the near term, the 4-hour chart shows XAU/USD as neutral-to-bearish. The metal is positioned below a flat 20 SMA and above a directionless 100 SMA, which is close to the shorter one. The 200 SMA, located around the $2,690 mark, serves as dynamic resistance. Additionally, technical indicators have turned lower near their midlines, lacking the momentum needed for a bearish continuation.

Support levels: 2,626.70, 2,611.35, 2,598.70

Resistance levels: 2,643.30, 2,655.00, 2,671.55

Fundamental Overview

The renewed strength of the US Dollar has put modest pressure on gold prices, with XAU/USD experiencing intraday losses. The pair is currently hovering around $2,640 during the American session, looking to extend its decline following better-than-expected economic data from the United States.

S&P Global released its final estimate for the November Manufacturing Purchasing Manager Index (PMI), which was revised upwards to 49.7 from a preliminary estimate of 48.8. The official ISM Manufacturing PMI for the same month came in at 48.4, exceeding expectations of 47.5 and up from the previous reading of 46.5.

Meanwhile, Wall Street is showing mixed results; the Dow Jones Industrial Average is down over 100 points, while the S&P 500 and Nasdaq Composite are both up for the day. Market sentiment has been dampened by news over the weekend regarding political unrest in France and escalating tensions between the US and Russia, following President-elect Donald Trump's threat to impose tariffs on BRICS countries.

This week, attention will be focused on US employment data, with several job-related figures set to be released ahead of the Nonfarm Payrolls (NFP) report on Friday.

Trump’s Warning on Dollar Alternatives Fuels Gold Decline and Market Uncertainty
Trump urged the nine-nation bloc to refrain from supporting or establishing alternatives to the dollar, warning that defiance could lead to 100% tariffs. This raised concerns that U.S. interest rates might stay elevated for an extended period, which contributed to a 3% drop in non-yielding gold throughout November—the largest monthly decline since September 2023.

Grant observed that gold has since reduced its losses, bolstered by ongoing geopolitical uncertainty. He suggested that the downside for gold is limited and anticipates a turbulent, consolidating market as the year concludes.

The dollar index (.DXY) rose by 0.7%, on track for its best daily performance in nearly four weeks, which pressured gold as the stronger dollar made the metal more expensive for buyers using other currencies.

Key U.S. economic events this week include the release of job openings data, the ADP employment report, and non-farm payrolls. Additionally, speeches from Federal Reserve officials, including Chair Jerome Powell, are expected to attract attention.

BMI analysts noted, "We see significant downside risks for gold in 2025, anticipating considerable volatility as the U.S. Federal Reserve is likely to adopt a more cautious stance regarding interest rate cuts, which would negatively impact gold." Following last month's 25-basis-point reduction to a range of 4.50%-4.75%, markets currently estimate a 64% chance of another cut in December, in line with major brokerages' expectations.

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Past performance is not indicative of any future results. This information is provided for informative purposes only and should not be construed to be investment advice.