Gold Gains as US Dollar Slides Following Weak US Data

Gold (XAU/USD) has started the week on a cautiously positive note, supported by a slight pullback in US Treasury yields and weaker-than-expected US manufacturing data. However, the precious metal remains near recent lows following a 2.5% drop late last week.

US Treasury yields declined on Monday after a sharp rally last week, easing some of the recent upward pressure on the US Dollar. Investors are hesitant to make strong bets on the US Dollar as they await the crucial Federal Reserve (Fed) monetary policy decision on Wednesday.

The market is almost fully anticipating an interest rate cut, though it expects only gradual easing next year. This, combined with expectations that Donald Trump’s policies could fuel inflation, is providing support for the US Dollar.

Gold’s rally was once again halted at the $2,720 resistance level last week before it pulled back. The potential double top at this level, combined with Thursday's bearish engulfing candle, is fueling bearish sentiment.

The support at $2,635 has been holding back downward moves, but the commodity is struggling to gain upward momentum. The previous support level at $2,675 may now act as resistance, with the $2,692 level (the December 12 high) as the next key hurdle.

On the downside, if prices fall below the December 9 low around $2,630, the next bearish target would be the lows from November 25, 26, and December 6, around $2,610.