Gold price drops despite geopolitical tensions
Gold plummets in December, hits key support amid bearish sentiment
Gold has entered December on a sour note, extending its decline from November’s 3% dip, the metal’s worst monthly performance since September 2023.
The bearish tone continues, with prices breaking below key technical levels early in Monday's Asian session. This sharp pullback has raised questions about whether the precious metal is setting up for a rebound or deeper losses.
After closing the last week of November at $2,650, gold slid further, breaching the intraday 100 EMA and falling below the intraday bullish channel support at $2,645. Adding to the downward momentum, the price has now dipped below the 50% Fibonacci retracement level. Analysts are closely watching the next key support at the 61.8% Fibonacci level, near $2,600, which could serve as a potential inflection point for a reversal.
Dollar index and geopolitical tension shape gold outlook
The broader context also paints a challenging picture. The dollar index fell to its lowest level since mid-November, yet it still managed a 2% rise for the month, supported by expectations of prolonged higher interest rates under the Trump administration. Higher rates continue to weigh on bullion, as the opportunity cost of holding non-yielding assets like gold increases.
Profit-taking after this year’s substantial gains in gold prices has also contributed to the recent downturn, alongside easing concerns in the Middle East following ceasefire talks. However, ongoing geopolitical tensions, particularly Russia's continued attacks on Ukraine’s energy infrastructure and violations of the Israel-Hezbollah ceasefire in southern Lebanon, are keeping some demand for safe-haven assets alive.
Looking ahead, traders are awaiting key U.S. economic data releases, including job reports this week, for clues on the Federal Reserve's monetary policy trajectory. Should economic data hint at a pivot to rate cuts, gold may find renewed bullish momentum. For now, $2,600 remains a crucial support level that could dictate the metal’s next move.
Gold’s nine-month winning streak ended in November. The downturn coincided with Donald Trump’s election victory, which bolstered the U.S. economy’s outlook, undermining gold’s appeal.
