Gold price climbs to one-week top on softer US bond yields, geopolitical tensions

• Gold price gains follow-through with a positive traction for the second consecutive day on Tuesday.

• Geopolitical risks, softening of US bond yields and subdued USD demand benefit the XAU/USD.

• Bets for less aggressive Fed rate cuts favor the USD bulls and might cap the precious metal.

Gold price (XAU/USD) attracted some haven flows after posting its steepest weekly drop in more than three years last week and snapped a six-day losing streak on Monday amid heightened geopolitical tensions. Adding to this, softening US Treasury bond yields prompted some US Dollar (USD) profit-taking following the post-US election rally to a fresh year-to-date and turned out to be another factor that benefited the non-yielding yellow metal.

The USD bulls remain on the defensive during the Asian session on Tuesday and assist the Gold price in recovering further from a two-month low touched last Thursday. Meanwhile, expectations are that US President-elect Donald Trump's policies will rekindle inflationary pressures and limit the scope for further rate cuts by the Federal Reserve (Fed). This should keep the US bond yields elevated and favors the USD bulls, which might cap the XAU/USD. 

Gold price continues to attract haven flows amid geopolitical risks stemming from Russia-Ukraine conflict

US President Joe Biden's decision to authorize Ukraine to use long-range American missiles against military targets inside Russia prompted some haven flows and benefited the Gold price on Monday. 

The US Dollar extended its profit-taking slide from the year-to-date high touched last week on the back of retreating US Treasury bond yields and provided an additional boost to the XAU/USD. 

The precious metal attracts some follow-through buying for the second straight day on Tuesday, though reduced bets for more aggressive rate cuts by the Federal Reserve might cap the upside. 

US President-elect Donald Trump's incoming administration is expected to focus on lowering taxes and raising tariffs, which could stoke inflation and limit the Fed's ability to ease monetary policy. 

A slew of influential FOMC members, including Fed Chair Jerome Powell, recently suggested caution in cutting rates, which, in turn, favors the USD bulls and should cap the non-yielding yellow metal.

Tuesday's US economic docket features the release of Building Permits and Housing Starts. Adding to this, a speech by Kansas Fed President Jeffrey Schmid will drive the USD later during the US session. 

The focus, however, will remain glued to manufacturing and service sector PMI data on Friday, which could offer early cues on how companies are reacting to the threat of Trump's proposed trade tariffs.

Gold price might confront stiff resistance near 38.2% Fibo. level; the $2,600 support  is key for bulls

The overnight strong move up comes on the back of last week's resilience below the 100-day Simple Moving Average (SMA). Moreover, the momentum pushed the Gold price beyond the 23.6% Fibonacci retracement level of the recent corrective decline from the all-time peak and underpins prospects for additional intraday gains. That said, oscillators on the daily chart – though they have been recovering from lower levels – are yet to confirm a positive bias. Hence, any subsequent strength is more likely to face stiff resistance near the $2,634-2,635 region or the 38.2% Fibo. level. Some follow-through buying, however, could trigger a short-covering rally towards the $2,655-2,657 congestion zone en route to the $2,664-2,665 area. 

On the flip side, the $2,600 mark, which coincided with the 23.6% Fibo. level, now seems to protect the immediate downside. A convincing break might expose the next relevant support near the $2,569-2,568 region and eventually drag the Gold price to the 100-day SMA, currently pegged near the $2,551-2,550 area. Some follow-through selling below last week's swing low, around the $2,536 zone, will be seen as a fresh trigger for bearish traders and pave the way for a fall towards the $2,500 psychological mark.