Gold declines amid a bullish USD and positive risk tone; downside potential seems limited

• Gold drifts lower on Monday as the USD preserves recent gains to a multi-month high.
• A positive risk tone undermines the safe-haven commodity and contributes to the fall.
• Geopolitical risks could support the XAU/USD pair amid mixed signals from Fed officials.

Gold (XAU/USD) attracts fresh sellers during the Asian session on Monday and declines below the $4,050 level in the last hour, though it lacks follow-through. The US Dollar (USD) sticks to its bullish bias near the highest level since late May despite mixed signals from US Federal Reserve (Fed) officials and continues to undermine demand for the commodity. Moreover, a generally positive tone around the equity markets is seen as another factor exerting downward pressure on the safe-haven bullion.

However, persistent geopolitical uncertainties stemming from the intensifying Russia-Ukraine war and fresh conflicts in the Middle East might hold back bearish traders from positioning for any further depreciating move for the Gold price. The precious metal remains confined in a familiar range held over the past week or so as trader now look forward to this week's US macro releases, including the prelim Q3 GDP and the Personal Consumption Expenditure (PCE) Price Index, for a fresh impetus.

Daily Digest Market Movers: Gold remains depressed as a bullish USD and positive risk tone offset reviving Fed rate cut bets

• New York Federal Reserve President John Williams described the current policy as modestly restrictive and told reporters on Friday that he sees room for the central bank to lower rates in the near term. Traders were quick to react and are now pricing in around a 67% chance that the Fed will lower borrowing costs in December.
• However, other Fed officials maintained a hawkish stance, with Dallas Fed President Lorie Logan calling for leaving the policy rate on hold for the time being. This assists the US Dollar in preserving its recent gains to the highest level since late May and exerts downward pressure on the Gold during the Asian session on Monday.
• Meanwhile, the renewed optimism that the US central bank will cut interest rates again in December boosts investors' appetite for riskier assets. This allows most Asian stocks to rise on Monday and recover some of the recent losses, which, in turn, is seen as another factor that undermines demand for the safe-haven precious metal.
• Ukraine launched a significant drone attack on a heat and power station in Russia’s Moscow region. Russia, on the other hand, said that it had captured three more villages in eastern Ukraine. Meanwhile, US President Donald Trump has given Ukraine until November 27 to approve a 28-point peace plan to end the nearly four-year war.
• Ukraine is seeking changes to the proposal that accepts some of Russia's hardline demands and makes painful concessions in order to end the invasion. This keeps geopolitical risks in play and might continue to offer some support to the precious metal, warranting some caution before positioning for any further depreciating move.
• Traders now look forward to a rather busy US economic docket this week, featuring the delayed release of the Producer Price Index (PPI), Retail Sales, and the Conference Board's Consumer Confidence Index on Tuesday. This will be followed by the preliminary Q3 GDP and the Personal Consumption Expenditure (PCE) Price Index on Wednesday.
• The latter would offer more cues about the Fed's future rate-cut path, which, in turn, will play a key role in influencing the near-term USD price dynamics and provide some meaningful impetus to the non-yielding yellow metal.

Gold needs to break below the $4,030 confluence to back the case for any further losses

From a technical perspective, the XAU/USD pair, so far, has managed to defend an upward-sloping trend-line extending from late October. The said support is currently pegged near the $4,030 region and now coincides with the 200-period Exponential Moving Average (EMA) on the 4-hour chart. This, in turn, should act as a key pivotal point, which, if broken decisively, might turn the Gold price vulnerable to weaken further below the $4,000 psychological mark and test last week's swing low, around the $3,968-3,967 area. The downward trajectory could extend further the $3,931 support en route to the $3,900 mark and late October swing low, around the $3,886 region.

On the flip side, the $4,080 supply zone now seems to act as an immediate hurdle ahead of the $4,100 mark. A sustained move and acceptance above the latter could lift the Gold price to the next relevant hurdle near the $4,152-4,155 region. The momentum could extend further and allow the XAU/USD pair to climb further towards reclaiming the $4,200 round figure.