It is important to note that U.S. Treasury yields spiked at the market open on Sunday following President Trump's statement that he has no plans to replace Federal Reserve Chairman Jerome Powell. This also led to a simultaneous rise in the U.S. dollar. Although the momentum is not significant, caution is still advised when shorting the USD/JPY currency pair.

Short USD/JPY

Tonight's U.S. Nonfarm Payrolls data is crucial. If the figure falls below 100,000, gold prices may find support around the 2600 level and see a short-term rise. Conversely, if the figure exceeds 200,000, gold prices might break through the 2600 level and continue to decline.

Key Impact of U.S. Nonfarm Payrolls on Gold Prices

Yesterday’s German inflation rate fell short of expectations, but the euro only experienced a brief dip before rebounding. This reflects the oversold condition of the euro, as mentioned previously, with stronger-than-expected support at the bottom. Given that France’s budget crisis has lowered market expectations for French data, a CPI reading above expectations could trigger a sharp rise in the euro, similar to the yen’s surge this morning.

However, attention should also be paid to Italy’s inflation performance. If Italy’s inflation meets or exceeds expectations, it will also benefit the euro. The key scenario to watch is when inflation data from Germany, France, and Italy show mixed results. In that case, only the overall eurozone data might drive a breakthrough for the euro.

Euro's Resilience Amid Inflation Data Fluctuations

Considering the rebound of gold prices after the ceasefire between Lebanon and Israel, the risk of escalation of the war between Russia and Ukraine, and the fact that the reverse Trump deal is beneficial to the commodity market, the collective rise of Chinese stock market and metal prices today, etc., coupled with the formation of a bottom on the technical side, gold prices may rise in the short term.

Short-term XAU/USD

Over the weekend, Ukrainian President Zelensky said there was a possibility of a ceasefire with Russia by 2025, while Israel agreed in principle to a ceasefire with Lebanon. While the word “in principle” is not a sure thing for a ceasefire, it could ease market concerns, which could be unfavorable for gold prices. However, news that OPEC is extending its production cuts is still good for oil prices. Don’t sell too soon before WTI hits a high of $72.

Geopolitical Ceasefires and OPEC Cuts Shape Market Sentiment

Gold prices rose for the third consecutive session on Wednesday, reaching a weekly high amid escalating Russia-Ukraine tensions, which heightened geopolitical risk concerns and drove investors toward gold as a safe-haven asset.

Investors are also monitoring speeches from U.S. Federal Reserve officials this week. Expectations for a rate cut in December have significantly dropped, with current odds at just 55.7%.

U.S. brokerage firms suggest that if Trump is re-elected, his proposed tariffs may increase global market volatility, trigger inflationary pressures, and limit central banks' room for monetary policy easing.

Although gold has traditionally been a hedge against inflation, its appeal diminishes in a high-interest-rate environment as it does not yield returns.

Gold Prices Surge Amid Geopolitical Tensions and Monetary Policy Speculations

Keep an eye on the UK inflation report this afternoon. With the cooling of Trump-related trading, the USD has retreated, and the GBP, though not exceptional, has remained stable and is rising. It has reached a critical support level of 1.27. You can consider buying on dips or waiting for a breakout after the data release to follow the trend.

UK Inflation Report and GBP Performance

The significant drop in the USD has created an opportunity for gold prices to rebound. However, this rise remains aligned with the overall commodity market trend. Considering the ongoing negative impact of Trump’s tariffs on the commodity sector, gold's upward momentum is unlikely to sustain in the short term.

Gold Prices Struggle to Sustain Gains Amid USD Weakness and Tariff Pressures

Recent reports reveal that Trump’s team is prioritizing “fully autonomous driving,” a goal that aligns with Elon Musk’s vision. However, Trump’s policies are not favorable for electric vehicles, including plans to cancel the $7,500 EV subsidy. Musk’s collaboration with Trump is likely centered around rolling out autonomous robo-taxis.

Under current U.S. regulations, manufacturers are limited to deploying 2,500 vehicles annually, but a proposed bill aims to increase this to 100,000. Although similar legislation failed under both Trump and Biden due to opposition from rival parties and manufacturers seeking litigation protection, the Republican-controlled Congress might push it forward. Nonetheless, narrow margins in the House and potential defections leave the bill’s fate uncertain.

In the short term, this news could provide a strong boost to Tesla's stock price.

Tesla's Self-Driving Dreams Under Trump's Agenda

China’s stimulus measures are expanding, with a new property tax policy announced just five days ago set to lower transaction taxes on home purchases starting December 1. China’s recent sovereign dollar bonds attracted high demand with a 20x subscription rate, priced only 1 basis point above U.S. Treasuries, signaling foreign investors’ confidence in China’s economic stability. With a key real estate price report and an economic press conference tomorrow, the Chinese stock market may break past the 13,700 mark and potentially reach 14,000.

China’s New Tax Policy Boosts Real Estate and Investor Confidence

The speech of the Fed officials may cause the US dollar and US stocks to pull back, while causing the yen to rebound. In addition, the Chinese stock market is still under pressure from Trump's deal, and the 6 trillion yuan debt stimulus of the National People's Congress has disappointed the Chinese stock market. If the market opens lower again today, it will also be unfavorable for commodity currencies. Therefore, it is best to wait for the price to fall back to key support if the New York yen is bullish in the short term.

Buy on dips after falling back to 91-91.3

Japanese Prime Minister Shigeru Ishiba unexpectedly resigned, which will negatively affect the yen exchange rate today. The market is concerned that the new government may slow down the pace of interest rate hikes, causing the yen to depreciate. Therefore, it is possible to consider selling EUR/JPY.

May Chen

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