Does the Rising US Dollar Spell Trouble for Gold?


Does the Rising US Dollar Spell Trouble for Gold?

Gold struggled for the direction on Monday, weighed down by a robust U.S. dollar, as investors eyed upcoming economic data and remarks from Federal Reserve officials for clues on the future of U.S. interest rates.

The dollar index .DXY gained 0.5% to 106.70, on track for its best day in over a week, making greenback-priced bullion more expensive for holders of other currencies.

The greenback extended gains after strong U.S. manufacturing data from both the Institute for Supply Management and S&P Global reports. However, despite the generally upbeat data, Federal Reserve Governor Christopher Waller said on Monday he was inclined to cut the benchmark interest rate at the Dec. 17-18 meeting as monetary policy remained restrictive.

Some of the comments of President-elect Donald Trump towards the BRICS countries not to move away from the U.S. dollar are supporting the dollar and moderately weighing on the gold prices today.

Trump on Saturday called on BRICS nations to pledge not to establish or endorse an alternative currency to the U.S. dollar, warning of 100% tariffs for non-compliance.

Bullion fell over 3% in November, its steepest monthly drop since September 2023, amid fears that Trump’s tariff plans could prolong higher interest rates.

The ongoing slowdown in U.S. economic activity is expected to prompt further Fed rate cuts in December, boosting investment demand and driving gold.

Major brokerages maintain their expectation of a 25 basis-point Fed rate cut in December, following PCE price index data aligning with market forecasts on Wednesday.

Key U.S. economic events this week include job openings data, ADP employment report and non-farm payrolls. Speeches from Fed officials, including Chair Jerome Powell, will also draw attention.

Technical Outlook – Gold Futures

Gold prices retreated from the day’s high of 77,034 on Monday, closing at 76,687 compared to Friday’s close of 76,374.

After last week’s slight upside momentum, gold prices turned cautious, with the daily chart forming a High Wave candlestick pattern, indicating indecision in the near term.

Key Technical Levels to Watch:

Upside: A decisive breakout above 77,120 is required for prices to gain momentum towards 77,638 and 78,050.

Downside: Immediate support lies at 76,050, followed by 75,650 and 75,100. Failure to hold these levels could trigger further downside pressure.

Gold prices are expected to remain range-bound unless there is a clear directional breakout. Market participants should closely monitor global economic cues and risk sentiment for potential triggers.

Until then, Happy Trading!

Commodity Samachar Securities
We Decode the Language of the Markets

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