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Gold Retreat on Dollar Strengthens and Yield Increase

Gold retreat dollar strengthens

Gold prices retreat as the U.S. dollar strengthens; Nasdaq 100 sinks, facing critical support amid rising yields.

In a tumultuous start to the new year, gold prices faced a setback as the U.S. dollar flexed its strength and yields surged higher. Simultaneously, the Nasdaq 100 witnessed a decline, sinking to a crucial support area.

Gold Price Retreat

The price of gold (XAU/USD) exhibited a moderate retreat on Tuesday, succumbing to the dual forces of rising interest rates and the commanding resurgence of the U.S. dollar. Following a lackluster display last month, the dollar’s robust performance took center stage as the first trading session 2024 unfolded.

The Nasdaq 100 also experienced a setback, posting its most significant daily decline since late October, plummeting 1.7% to 16,543. The substantial rally in U.S. Treasury yields caused this decline in the Nasdaq 100.

Cautious Start to the Year

After a robust finish to 2023 for the yellow metal and the technology index, traders adopted a cautious stance at the beginning of the new year. Concerns about a potentially more significant pullback prompted investors to trim exposure to both assets, especially with high-profile events looming in the coming days.

Investors are focusing on crucial catalysts in the financial markets scheduled for later this week. Wednesday brings the ISM manufacturing PMI and U.S. employment numbers on Friday. Wall Street expects these reports to enable an assessment of the broader economic outlook and justify aggressive easing expectations.

Gold Retreat on Dollar Strengthens and Yield Increase

Market Response to Economic Figures

In the broader perspective, subpar economic figures would likely support tech stocks and gold prices by affirming expectations for aggressive rate cuts. Conversely, robust data might trigger an opposing response, leading to a decline in bullion and the Nasdaq 100 as traders dial back their bold rate cut forecasts.

Technical Analysis – Gold

Gold trended lower on Tuesday, marking the third consecutive session of decline. The failure to clear a key resistance in the $2075-$2,085 region has led to a retracement, with support appearing at $2,050-$2,045. Bulls must vigorously defend this floor; otherwise, XAU/USD could retreat towards $2,010, near the 50-day simple moving average.

Conversely, a resurgence in buying interest could propel gold prices upward, with the first line of defense against a bullish attack emerging at $2075-$2,085. While previous attempts to break through this ceiling have been unsuccessful, a sustained breakout could bring the all-time high at $2,150 back into play.

Technical Analysis – Nasdaq 100

The Nasdaq 100 experienced a sharp decline on Tuesday, narrowly avoiding breaching confluence support near the 16,700 area. Uphold this technical floor at all costs to sustain bullish aspirations for achieving a new record. Failure to do so might prompt a deeper downward move, with the next area of interest at 16,150.

On the positive side, if market sentiment stabilizes and a rebound occurs in the upcoming trading sessions, overhead resistance at 17,165 looms. While a retest may lead to rejection, a breakout could trigger a rally toward 17,500, marking a new milestone for the tech index.

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