Gold price drops to nearly two-month low, seems vulnerable near $2,560 area

Gold price remains under heavy selling pressure amid the continuation of the Trump trade.

The optimism over stronger US economic growth lifts the USD to a fresh YTD top on Thursday.

Rising US bond yields also contribute to driving flows away from the non-yielding yellow metal.

Gold price (XAU/USD) attracts sellers for the fifth successive day and drops to its lowest level since September 19, around the $2,559-2,558 region during the Asian session on Thursday. The US Dollar (USD) prolongs its post-election rally and climbs to a fresh year-to-date (YTD) peak amid hopes that US President-elect Donald Trump's policies will spur growth. This, in turn, is seen as a key factor that continues to weigh heavily on the USD-denominated commodity. 

Meanwhile, investors believe that expected protectionist tariffs from the new Trump administration could boost inflation and force the Federal Reserve (Fed) to pause its easing cycle. Moreover, US data released on Wednesday pointed to slower progress toward bringing inflation down and could result in fewer rate cuts next year. This remains supportive of elevated US Treasury bond yields and also contributes to driving flows away from the non-yielding Gold price.

Apart from this, a generally positive tone across the global equity markets exerts additional pressure on the safe-haven precious metal and supports prospects for a further downward move. Traders now look forward to the release of the US Producer Price Index (PPI) for short-term opportunities. The focus, however, will remain on Fed Chair Jerome Powell's speech, which could offer cues about the future rate-cut path and provide a fresh impetus to the Gold price.