In the early hours of trading on Tuesday, December 24, spot gold was moving within a narrow range, hovering around $2615.35 per ounce. After experiencing a lackluster holiday season trading on Monday, gold prices were under significant pressure. A strong rebound in core durable goods orders in the U.S. helped strengthen the dollar, while the 10-year U.S. Treasury yield hit a fresh six-month high. This combination of factors led to a notable decline in gold prices. The U.S. dollar index rose 0.4% on Monday, hovering near a two-year high. This marked the fourth consecutive increase in the dollar index over five trading days, with a cumulative rise of 1.2%. This shift diminished the appeal of gold for holders of other currencies. Meanwhile, the 10-year Treasury yield surged by 7.3 basis points to close at 4.597%, the highest level since May 30, 2023, after briefly touching 4.599% during the day.

Looking ahead, both bond markets and the gold market, along with the majority of markets in Europe and the U.S., will close early on Tuesday (Christmas Eve) and remain closed on Wednesday due to the Christmas holiday. For the remainder of the day, the market will be watching closely for U.S. new home sales data for November and any updates on geopolitical developments.

The Federal Reserve's shift in tone last week, suggesting a reduced pace of rate cuts in 2025, further added downward pressure on gold prices. Fed Chairman Jerome Powell also indicated that future rate cuts would be cautious, while citing the ongoing strength of the U.S. economy. This, coupled with a series of stronger-than-expected economic data, significantly lowered the appeal of gold. According to the CME’s FedWatch tool, there is a 91.4% probability that the Fed will keep rates unchanged in January 2025, with an 8.6% chance of a 25-basis-point cut. The odds for a rate cut in March 2025 stand at 41.7%. These developments suggest that gold prices will likely remain under pressure in the near term.

Further supporting the notion of a firm U.S. economy, key durable goods orders for November saw a strong increase, particularly in machinery, while new home sales rebounded after being negatively impacted by hurricanes. These figures suggest that, as 2023 draws to a close, the U.S. economy remains resilient. However, there are growing concerns that the incoming government might impose tariffs or raise duties on imported goods, which could dampen economic growth in the coming year. Other data released on Monday showed a decline in consumer confidence for December, although consumers remain optimistic about the labor market. Additionally, strong consumer spending data from last week highlighted the economy’s resilience, contributing to the Fed’s decision to reduce its expected pace of rate cuts for 2025.

The combination of these factors suggests that the dollar and Treasury yields will likely continue to strengthen in the short term, which will put pressure on gold. As a result, the outlook for gold remains one of consolidation or possible downside over the next few months, with the potential for a return to lower levels.

On the technical front, today’s gold market is expected to remain relatively quiet, given the early closure of U.S. markets for the holiday. Gold has been trading in a narrow range, with little momentum for a strong rebound. The strength of the dollar continues to limit any potential upward movement in gold prices. In the daily chart, we can see a back-and-forth tug of war between buyers and sellers, with no clear direction yet. Traders will continue to focus on key levels, with $2600 being a critical support zone. A breach below this level could trigger further weakness, while holding above it would allow for a continuation of the consolidation phase.

Yesterday, gold prices briefly surged higher but quickly reversed course, failing to sustain any significant upside momentum. The market is still being driven by the bears, as evidenced by the continued pressure from the dollar bulls. In the short-term, traders should continue to focus on selling opportunities around the $2620 level, as gold remains under heavy downward pressure. The next key support level for gold lies at $2600, and the market may move towards this level during the Asian and European trading sessions. Given the holiday mood and light trading volume, a significant price movement may be unlikely, but a small pullback towards $2600 could offer opportunities for short positions.

As for the strategy, traders should consider shorting gold on rallies, especially if prices approach the $2620–$2625 resistance zone. A potential target for shorts could be the $2600–$2598 support area. As the market remains in a range-bound mode, patience will be key, and traders should be prepared for potential choppy movements over the next few sessions.

Turning to the oil market, U.S. crude oil prices were oscillating around $70 per barrel last Friday and remained in the same range this week. The sharp drop in oil prices was primarily due to U.S. crude inventory data and monthly reports from major oil agencies, which pointed to excessive production and rising inventories, both of which weighed on the oil market.

Geopolitical factors continue to be a significant influence on oil prices. Market participants are keenly aware of the ongoing tensions in key oil-producing regions, which could trigger volatility in prices. Despite the bearish fundamentals stemming from the supply side, geopolitical risks continue to provide an underlying floor for oil prices, keeping traders on edge.

In terms of strategy, the best approach for the oil market is to trade within the established range. On the upside, watch for resistance around $69.2–69.6, with stronger resistance at $71. On the downside, key support levels lie at $68 and $67. The current price action suggests that oil is in a weak state, as it has fallen below all of its moving averages. Therefore, a bearish stance remains appropriate for now, with potential entry points around $69, as long as traders manage their stop losses carefully. Real-time adjustments will be essential, given the volatility and the unpredictable nature of oil prices in the short term.