Gold’s price (XAU/USD) is seeing gains tick up trading near $2,952 at the time of writing, fueled by a weaker US Dollar (USD) and softening US yields in a reaction to the recent German federal election outcome. Although the far-right party Alternative for Germany (AfD) has gained 20% of votes, the Christian Democratic Union of Germany (CDU) is comfortable in the lead with 208 seats against AfD’s 152. US yields dropped off and the CME Federal Reserve (Fed) Futures are now favoring a 25 basis points (bps) rate cut in June, where last week odds were rather for no rate cut in June.

Meanwhile, traders will watch the US Gross Domestic Product (GBP) release for the fourth quarter of 2024 later this week. Given the recent slowdown in US activity and economic data (for example, the softer Services Purchase Managers Index (PMI) reading on Friday), another drop in US yields could be triggered, with markets anticipating the Federal Reserve lowering its monetary policy rate to boost the economy and demand. The US dollar weakened after several reports and economic data points last week revealed that US business activity slowed and consumer confidence waned, with expectations for inflation surging and markets pricing in more rate cuts by the Federal Reserve this year.