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Gold prices (XAU/USD) reversed sharply from a three-week high of $2,721, pressured by a risk-on sentiment in global markets. The nomination of Scott Bessent as US Treasury Secretary and reports of a possible Israel-Hezbollah ceasefire boosted investor confidence, dragging the safe-haven metal towards the mid-$2,600s. Expectations of limited Federal Reserve rate cuts further weighed on gold. However, retreating US bond yields and profit-taking in the USD offered some support, halting further losses. Technically, gold faces immediate resistance at $2,678, while support lies near $2,650. Key events like FOMC minutes and PCE data this week may shape the outlook.

Key Highlights

* Gold retreats sharply after hitting a three-week high of $2,721.

* Risk-on sentiment boosted by Israel-Hezbollah ceasefire hopes and US Treasury Secretary nominee.

* Limited Fed rate cut expectations weigh heavily on the non-yielding metal.

* US bond yield declines and USD profit-taking provide marginal support.

* Key support at $2,650 may determine further downside momentum.

Gold prices (XAU/USD) declined sharply on Monday, snapping a five-day winning streak and retreating from a three-week high near $2,721 during the Asian session. The upbeat market sentiment, fueled by reports of a potential Israel-Hezbollah ceasefire and the nomination of Scott Bessent as US Treasury Secretary, encouraged risk-taking and undermined the safe-haven demand for gold. Investors' optimism surrounding the new administration's pro-business policies further pressured prices.

Moreover, expectations of reduced Federal Reserve rate cuts in the near term added to the downward momentum. Hawkish commentary from Fed officials and a rise in US PMI data to 55.3 – its highest since April 2022 – supported a stronger economic outlook, limiting gold’s appeal. Despite this, profit-taking in the US Dollar and a drop in Treasury yields provided some relief, keeping gold above $2,650.

Technically, gold broke below the 23.6% Fibonacci retracement level of its recent rally but found temporary support near the 100-period SMA around $2,660. While further declines to $2,650 or $2,629 remain possible, the metal could face resistance at $2,678 and $2,700, with a move above $2,722 potentially signaling renewed bullish momentum.

This week, market participants will closely monitor FOMC minutes and PCE data for further cues on monetary policy, which could significantly impact gold prices.

Finally

Gold’s immediate trajectory hinges on $2,650 support; a break below may deepen losses, while resistance at $2,678 could trigger recovery towards $2,700 or higher.

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