Gold Experienced Intraday Volatility Exceeding $60
On Monday (November 25th), as the European market session began, gold prices fell nearly 2% due to profit-taking after a five-day rally and the announcement of Scott Bentson as the next U.S. Treasury Secretary.
As of press time, spot gold fell by 1.5% to around USD2,670, after falling by more than 2% at one point and exceeding USD60 during the day. Earlier in the day, gold prices hit their highest since Nov. 6.
Forexlive noted that the rapid decline in gold during the Asian trading session today is most likely due to the nomination of Scott Bentson as the U.S. Treasury Secretary. Bentson is a fiscal hawk, and the market widely considers him an ideal candidate for the position.
One of the main reasons for the weakening correlation between gold and real yields in recent years is the excessive expansion of U.S. fiscal policy. This has led to gold gaining more when real yields decline, and losing less when real yields rise.
From a broader perspective, gold remains in a bullish trend as the Federal Reserve's easing cycle unfolds, with real yields likely to continue falling. However, in the short term, gold prices may experience a pullback as the market readjusts expectations for interest rate cuts. Overall, gold may not continue its strong upward trajectory as in previous years, but it still has potential for gains.
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IG market strategist Yeap Jun Rong stated that the end of gold's five-day winning streak is due to partial profit-taking and the decision to select Bentson as the next Treasury Secretary. This implies a more moderate use of tariffs and a reduction in U.S.-China trade uncertainties.
Gold is considered a safe investment choice during times of economic and political uncertainty, but current market trends show a decrease in risk aversion.
Investors are awaiting the upcoming release of the Federal Reserve's November meeting minutes, Gross Domestic Product (GDP) data (first revision), and core PCE data this week.
According to the Chicago Mercantile Exchange's FedWatch tool, the market currently expects a 56% chance of a 25 basis point rate cut in December, down from 62% last week.
IG market analysts noted that recent signals from U.S. policymakers have been more moderate than before, and any signs of unexpected inflation increases could strengthen market expectations for keeping rates unchanged in December.
In geopolitical terms, on Sunday Hezbollah fired heavy rockets into Israel, following an Israeli airstrike that killed at least 29 people in Beirut. The rockets reportedly caused damage in areas near Tel Aviv.
Gold Technical Analysis
Daily Chart
On the daily chart, gold rebounded to the $2720 level, almost completely erasing the losses caused by the related news. However, influenced by the positive U.S. fiscal outlook, prices fell rapidly during today's Asian trading session. It is difficult to obtain more details from the daily chart, so a smaller time frame is needed to view more specific information.
4-Hour Chart
On the 4-hour chart, a strong support area can be seen forming around $2643 for gold, which coincides with the 38.2% Fibonacci retracement level. This area is expected to attract buying interest, with buyers likely setting stop-loss orders below the support level and attempting to position for a rebound to new highs. On the other hand, sellers hope to see the price break below this support to increase bearish bets and push prices towards new lows.
1-Hour Chart
On the 1-hour chart, recent price fluctuations can be more clearly seen, including the rapid decline overnight. Currently, prices are consolidating near the lower edge of the daily volatility range, indicating that there may be limited room for further declines in the short term.
Upcoming Influencing Factors
Data to be released tomorrow includes the U.S. Consumer Confidence Index and FOMC meeting minutes. On Wednesday, the U.S. PCE report and the latest U.S. initial jobless claims will be announced. These data may provide further guidance for gold prices.
