On Tuesday (January 7), during the Asian market's early session, spot Gold fluctuated within a narrow range, currently trading around $2635 per ounce. Gold prices fell slightly on Monday as the Federal Reserve recently hinted at slowing the interest rate cuts in 2025, while the U.S. Treasury yield climbed to a high not seen since May. During the session, the gold price hit a low of $2614.69 per ounce, the lowest in three trading days. However, conflicting reports regarding the aggressiveness of tariffs planned by President-elect Trump after taking office led to a drop in the USD to a one-week low. The gold price rebounded towards the end, closing at $2635.87 per ounce.

On Monday, the U.S. 10-Year Treasury Notes Yield reached its highest level since May, and the 30-Year Treasury Yield hit a 14-month high. The U.S. Treasury will auction long-term bonds in the next two days.

On Monday, the U.S. Treasury auctioned $58 billion of three-year bonds, with weak demand, resulting in a winning bid rate of 4.332%, which is 1 basis point higher than the yields in the secondary market before the auction. The bid-to-cover ratio was 2.62.

On Tuesday, $39 billion of 10-Year Treasury Bonds will be auctioned, followed by $22 billion of 30-Year Treasury Bonds on Wednesday.

Yields briefly fell after a report suggested that President-elect Trump’s planned tariffs would not be as aggressive as previously feared.

Earlier, The Washington Post reported that Trump's aides are exploring some tariff plans that would apply to all countries, but only cover certain industries considered essential to national or economic security. Trump later denied this report.

Analysts believe that Trump is expected to reduce taxes and relax business regulations, which will promote economic growth. Other policies, including crackdowns on illegal immigration and increased tariffs, are expected to stimulate inflation, which could lead to long-term economic drag.

However, some well-known economists, including former advisors to the USA president, state that Trump's plan may not drive inflation up as earlier analyses suggested.

Traders are uncertain about what policies may be implemented and how these policies will affect the USA's debt.

FHN Financial macro strategist Will Compernolle stated: "There is a great deal of uncertainty over what will happen once the new president is inaugurated and has a chance to secure a budget reconciliation bill. What impact will this have on Treasury issuance? I think no one is really sure what the net effect will be, but the risk of rising interest rates is greater."

The U.S. 10-Year Treasury Notes Yield rose by 1.7 basis points on Monday, reporting at 4.612%. During the day, this yield had reached a high of 4.644%, the highest since May 2.

(U.S. 10-Year Treasury Notes Yield daily chart, source: Easy Forex)

As the annual inflation rate remains above the 2% target, the number of rate cuts by the Federal Reserve is expected to be reduced this year. Federal Reserve Governor Cook stated on Monday that, given the robust economy and that inflation seems to be more persistent than previously expected, the Fed can take a cautious stance on further rate cuts.

Economic data to be released this week includes Friday's employment report, which is expected to show an increase of 154,000 jobs in December.

WisdomTree's CSI Commodity Equity Index strategist Nitesh Shah stated: "The rebound in Treasury Notes Yield puts pressure on Gold."

However, Shah said, "Based on the 'consensus' economic view of the depreciation of the USD and a fall in Treasury Notes Yield, we expect Gold prices to reach $3050/ounce by the end of the year. Further escalation of tensions in the Middle East could pose an upside risk to our forecast."

The USD declined by 1% on Monday from the two-year high touched last Thursday, with a day’s lowest at 107.74, marking a new low since December 30, while the low of December 30 at 107.73 also stands as the lowest point in the past two weeks.

The decline of the USD significantly narrowed after Trump posted on his Truth Social platform denying the report from The Washington Post. It closed at 108.24, which is also one of the reasons for the continued drop in Gold prices.

Corpay’s chief market strategist Karl Schamotta stated: "The reality is that Trump's views on Truth Social will drive Forex market volatility for some time, and Monday's reaction indicates the potential dynamics."

Schamotta added: "The consensus in the market is that Trump will make a big noise with little action, and any news confirming this view would push risk assets to soar while the USD and U.S. Treasury Notes Yield drop, but the reality is that downside risks remain and there is no clear endpoint."

Comments from Federal Reserve Governor Cook also helped curb the decline of the USD. Several Federal Reserve decision-makers are set to speak this week, and their comments may be similar to recent remarks from other officials, suggesting that there is still a need to tackle stubborn inflation.

Data released by the U.S. government on Monday showed that new orders for manufactured goods in the U.S. fell in November due to weak demand for commercial aircraft, while fourth-quarter capital expenditure by businesses seemed to slow down.

Market participants are now awaiting Friday's U.S. employment report, which may provide more information on the Federal Reserve's future policy path.

The Citigroup team believes that the USA will see a slowdown in new job creation in December to 0.12 million, down from November's 0.227 million, and expects the unemployment rate to rise from 4.2% in November to 4.4%. This is more pessimistic than other forecasts collected so far by the Wall Street Journal, which generally predict that the USA will add 0.155 million jobs, with the unemployment rate remaining steady at 4.2%.

Citigroup believes that the unemployment rate will climb to 4.5% over the next few months, leading to market expectations that the Federal Reserve will implement more interest rate cuts in 2025, exceeding the current expected levels.

Shaun Osborne, Chief Forex Strategist at Bank of Nova Scotia, stated, "The USD may see a correction of 2%, 3%, or 4% in the near future, but we need a stronger feeling to drive it, either through better performance of the European economy, which would lead to a further rise in European interest rates, or through easing tariff expectations."

On this trading day, pay attention to the USA's November trade balance and Eurozone's December CPI data, as well as the USA's December ISM non-manufacturing PMI data and November JOLTs job openings data. Additionally, monitor Richmond Fed President Barkin's speech, news related to geopolitical situations, and updates related to Trump.

Furthermore, Wednesday will bring the ADP employment report and the minutes from the Federal Reserve's most recent policy meeting, and investors need to pay attention to changes in market expectations.

(Spot gold daily chart, source: E-Huitong)

As of 07:46 Beijing time, spot Gold is reported at 2634.17 USD/ounce.