Nov 23, 2021 8:52 AM ET
The gold price was able to make some gains in the first half of trading on Tuesday, but struggled to capitalise on this development. The XAU/USD has since given back much of its previous day's gains and was last seen trading just above $1,800, its lowest level in almost three weeks, reached the previous day.
The US dollar's recent rally received a strong boost on Monday after the US president nominated Jerome Powell for a second term as Fed chairman. As investors considered the other frontrunner, Lael Brainard, the "softer" of the two candidates, the announcement boosted bets on higher US interest rates, which in turn drove the USD index to a 16-month high and triggered aggressive selling of dollar-denominated gold.
The growing acceptance of early Fed policy tightening led to a renewed rise in US government bond yields: the yield on the two-year US Treasury bond, which is heavily dependent on interest rate expectations, rose to its highest level since March 2020, and the yield on the 10-year US Treasury bond also rose above the 1.60% threshold. This further strengthened the greenback and acted as a headwind for the low-yielding yellow metal.
Market participants are now looking ahead to the US economic calendar with the release of the PMI flash data for November. This, along with US bond yields, will influence USD price dynamics and provide some lift to gold prices. Apart from this, traders will also take advantage of developments related to the coronavirus saga to take short-term opportunities in the XAU/USD pair. However, the main focus remains on the US releases due on Wednesday: the preliminary GDP (second estimate) for the third quarter, the durable goods orders, the core PCE price index and the FOMC meeting minutes.