Gold, Bond Yield, US Dollar Technical Analysis Following Upbeat US Data

NEW YORK (December 19) This week’s US economic data has painted a robust picture for the US dollar and Treasury Yields. US GDP grew at an annualized pace of 3.1%, surpassing the estimated 2.8%. Moreover, weekly jobless claims declined to 220K, beating expectations of a slower drop to 229K. These figures align with the Federal Reserve’s revised growth outlook and underscore the resilience of the US economy. The hawkish tone adopted by Fed Chairman Jerome Powell followed the central bank’s decision to cut interest rates by 25 basis points. This stance strengthened the US dollar, driving the Dollar Index (DXY) to test two-year highs.

The Federal Reserve’s updated projections have profoundly impacted market sentiment. Policymakers scaled down the expected rate cuts for next year while raising growth and inflation expectations. The PCE inflation forecast for 2025 was revised upward to 2.5% from the previous 2.1%. Economic growth estimates were also adjusted, with GDP now expected to grow by 2.5% in 2024 and 2.1% in 2025. These adjustments and Powell’s emphasis on inflation risks drove higher US Treasury yields. The US 10-year Treasury yield climbed above 4.5%, reflecting stronger investor demand for US assets.

On the other hand, gold (XAU) prices have struggled in this environment, extending losses below $2,600. Higher US yields and a stronger dollar have limited gold’s recovery potential, amplifying downside pressures. The Federal Reserve’s hawkish outlook and resilient economic data have reinforced the greenback’s attractiveness while weighing heavily on gold. This dynamic suggests that gold’s near-term recovery remains constrained unless there is a significant shift in economic conditions or monetary policy expectations.

FXEmpire