Gold (XAU) is consolidating around $2,625, driven by mixed factors. Geopolitical uncertainties, such as Trump’s tariff threats on Canada, Mexico and China, tend to boost gold prices. However, the optimism surrounding a ceasefire between Israel and Hezbollah has reduced its appeal as a safe haven. Moreover, the US Federal Reserve’s indication to maintain restrictive interest rates amid persistent inflation has further strengthened the US dollar. Stronger US economic data, including higher than expected consumer confidence, is also supporting the US dollar and putting pressure on gold.
In addition, US Treasury yields saw their sharpest decline since August but remain high on expectations of less easing from the Federal Reserve. Rising interest rates tend to strengthen the US dollar by attracting more investment, which indirectly puts pressure on gold prices. The US dollar index is close to consolidating its resistance, benefiting from Trump’s trade policies and stronger economic performance. The optimism surrounding the appointment of Scott Bessent as Minister of Finance has further increased risk appetite. This shift in sentiment has led investors away from gold. However, gold’s downside remains limited by ongoing concerns about the conflict between Ukraine and Russia, which is supporting demand for safe havens. Upcoming US economic data, including durable goods orders, employment claims and the PCE price index, could provide further direction for gold and the US dollar in the coming days.