Gold Price Forecast: XAU/USD retreats from all-time-high, as US bond yields advance

• Gold price experiences a significant drop of over 2%, after reaching a record high of $2,135.40.
• Fed Chair Jerome Powell's recent remarks emphasized caution, stating that the Fed is prepared to act if necessary and that it's too early to declare victory over inflation.
• US Real yields, a key driver for gold, also increased by nine basis points to 2.06%.

Gold price plunges more than 2% in early trading during the North American session on Monday after reaching an all-time-high (ATH) due to money market futures traders increasing bets the US Federal Reserve (Fed) would slash rates next year. At the time of writing, XAU/USD is trading at $2,024.13.

XAU/USD sees a sharp decline following Fed Chair Powell's comments and rising US Treasury yields

On Friday, the Fed Chair Jerome Powell pushed back against rate cut expectations, saying that if needed, the US central bank is prepared to act. Even though it acknowledged that inflation is slowing, and welcomed the latest PCE reading, he emphasized that it’s too early to declare victory. After Powell’s remarks, money market futures priced in 140 basis points of rate cuts toward December 2024. Futures attached to December’s contract expect the federal funds rate (FFR) at 4.105%.

In the meantime, US Treasury bond yields had trimmed some of last week’s losses. The US 10-year benchmark note rate is at 4.288%, nine basis points up from its opening price. Consequently, US Real yields, which greatly influence the prices of Gold, rose nine basis points, up by 2.06%.

The US economic docket revealed that orders for newly made goods fell more than estimated in October, the biggest drop in three and a half years. Estimates were around -2.8% contraction, but factory orders dropped -3.6%, below September’s downward revised 2.3% jump. The report shows the manufacturing sector is feeling the impact of higher interest rates. Last week’s ISM Manufacturing PMI was unchanged at 46.7, suggesting the economy continued to slowdown

XAU/USD Price Analysis: Technical outlook

Gold uptrend remains intact, but Monday’s price action could pave the way for a deeper correction as the downtrend accelerates, registering losses of more than $45.00 USD. The next support is seen at the October 27 daily high at $2,009.42 before challenging the $2,000 figure. A bullish resumption might happen, once the XAU/USD climbs above the May 4 swing high at $2,081.82, and the $2,100 mark.