- Gold price attracts some dip-buying and reverses a part of Thursday’s retracement slide.
- Geopolitical risks, trade war fears and Fed rate cut bets continue to benefit the commodity.
- Expectations for a less dovish Fed and elevated US bond yields might cap the precious metal.
Gold price (XAU/USD) regains positive traction following the previous day’s profit-taking slide from a five-week high, around the $2,726 area, albeit it lacks strong follow-through buying. Persistent geopolitical risks stemming from the Russia-Ukraine war and tensions in the Middle East, along with concerns over US President-elect Donald Trump’s tariff plans, continue to boost safe-haven demand. Adding to this, bets that the Federal Reserve (Fed) will deliver a third consecutive rate cut at the end of the December policy meeting next week act as a tailwind for the non-yielding yellow metal.
The upside for the Gold price, however, remains capped in the wake of expectations that will adopt a more cautious stance towards cutting interest rates amid signs that the progress in lowering inflation down to its 2% target has stalled. The outlook remains supportive of a further rise in the US Treasury bond yields, which assists the US Dollar (USD) to preserve its gains registered over the past week or so, to a fresh monthly peak, and keeps a lid on the Gold price. Traders might also opt to wait on the sidelines ahead of the crucial two-day FOMC policy meeting starting next Tuesday.
Gold price lacks bullish conviction amid expectations for a less dovish Fed
- Ukraine has fired US-supplied missiles, targeting strategic sites deep into Russian territory. Meanwhile, Russian forces edge closer to a key eastern Ukraine city Pokrovsk after monthlong intense fighting.
- Israel said on Thursday that its military would stay in the Syrian territory it seized until a new force was established that met its security demands and filled the vacuum after the collapse of the Syrian regime.
- This marks a significant escalation in geopolitical tensions and drives some haven flows towards the Gold price amid bets that the Federal Reserve will lower borrowing costs at the end of the December meeting.
- In the absence of any major upside surprise from the latest US consumer inflation figures released on Wednesday, the markets now seem to have fully priced in a 25 basis points Fed rate cut move next week.
- The US Bureau of Labor Statistics reported on Thursday that the headline Producer Price Index (PPI) rose 0.4% in November and the yearly rate accelerated from 2.6% in October to 3% during the reported month.
- The annual core PPI rose 0.2% in November and stood at 3.4% compared to the same time period last year, beating estimates and indicating that the progress in lowering inflation to the 2% target has stalled.
- This comes on top of expectations that US President Donald Trump’s expansionary policies will boost inflation and suggests that the Fed will adopt a more cautious stance on cutting interest rates going forward.
- Expectations for a less dovish Fed continue to push the US Treasury bond yields and assist the US Dollar to preserve its weekly gains to a fresh monthly peak, which might cap the lower-yielding yellow metal.
- Investors keenly await the crucial FOMC policy decision next week for cues about the interest rate outlook in the US. This will drive the USD demand and provide some meaningful impetus to the XAU/USD.
Gold price seems poised to climb further while above $2,675 pivotal support
From a technical perspective, any further strength back above the $2,700 mark is likely to confront resistance near the $2,725-26 region or the monthly high touched on Thursday. The subsequent move up could lift the Gold price to the $2,735 intermediate hurdle en route to the $2,748-2,750 supply zone. The next relevant barrier is pegged near the $2,775 region, above which bulls might aim to challenge the all-time peak, around the $2,800 neighborhood touched in October.
On the flip side, the $2,675-2,674 area now seems to have emerged as an immediate strong support. A convincing break below, however, might prompt some technical selling and pave the way for further losses towards the $2,658-2,656 confluence – comprising 50- and 200-period Simple Moving Averages (SMAs) on the 4-hour chart. The latter should act as a key pivotal point, which if broken decisively could make the Gold price vulnerable to weaken further towards the $2,632-2,630 area en route to the $2,600 round-figure mark.
US Dollar PRICE This week
The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the strongest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 1.00% | 0.64% | 2.03% | 0.59% | 0.39% | 1.31% | 1.61% | |
| EUR | -1.00% | -0.35% | 1.14% | -0.33% | -0.51% | 0.39% | 0.68% | |
| GBP | -0.64% | 0.35% | 1.32% | 0.01% | -0.17% | 0.74% | 1.01% | |
| JPY | -2.03% | -1.14% | -1.32% | -1.45% | -1.52% | -0.83% | -0.37% | |
| CAD | -0.59% | 0.33% | -0.01% | 1.45% | -0.15% | 0.72% | 0.97% | |
| AUD | -0.39% | 0.51% | 0.17% | 1.52% | 0.15% | 0.91% | 1.18% | |
| NZD | -1.31% | -0.39% | -0.74% | 0.83% | -0.72% | -0.91% | 0.25% | |
| CHF | -1.61% | -0.68% | -1.01% | 0.37% | -0.97% | -1.18% | -0.25% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
