Daily Price Outlook
Gold prices (XAU/USD) have been fluctuating within a narrow range, hovering around $2,645 to $2,650. The precious metal is showing a slight upward trend, but overall movement remains subdued. This pause in momentum comes as investors are taking a cautious stance ahead of the release of the Federal Open Market Committee (FOMC) Minutes on Wednesday.
Market participants are hoping for clearer insights into the Fed's future policy decisions, especially regarding potential interest rate cuts, which could influence gold’s price direction.
At the same time, gold faces some resistance due to rising U.S. Treasury bond yields. Higher yields make gold less appealing, as it doesn't offer interest or dividends like other investments.
In the meantime, the strength of the U.S. Dollar continues to add downward pressure on the yellow metal, making it more expensive for buyers holding other currencies.
On the other hand, geopolitical risks, such as the ongoing trade tensions and global political instability, continue to provide a safety net for gold. Investors are still turning to the precious metal as a hedge against potential inflation and economic turmoil.
US Dollar Strength and Fed’s Cautious Stance Weigh on Gold Price Outlook
On the US front, the broad-based US dollar has been holding steady above 108.50, reflecting its strength in the global market. The recent rise in the 10-year US Treasury bond yield, which is now at 4.67%, has contributed to this. This increase highlights the changing outlook of investors on the Federal Reserve’s interest rate plans. As the yield rises, it signals that the market expects the Fed to maintain a more aggressive stance on interest rates for a while.
In addition to the bond market, economic data has been supportive of the dollar. The ISM Services PMI for November increased to 54.1, surpassing expectations, and showing growth in the service sector. However, the Prices Paid Index, a measure of inflation, also surged, indicating rising costs.
Meanwhile, the ISM Manufacturing PMI improved slightly to 49.3 in December, hinting that the manufacturing sector is showing some signs of recovery, even if still in contraction territory.
Traders remain cautious due to concerns about President-elect Trump’s potential economic policies, especially regarding tariffs that could raise living costs. Federal Reserve officials have also expressed concerns about inflation. The latest projections from the Federal Open Market Committee (FOMC) show fewer expected rate cuts in 2025, reflecting caution as inflation remains persistent.
Fed officials like Raphael Bostic and Thomas Barkin have emphasized that interest rates should stay high until inflation is better controlled, which has added to the uncertainty in the market.
Therefore, the stronger US Dollar and rising Treasury bond yields create headwinds for gold, as higher yields make non-yielding assets like gold less attractive. Additionally, the Fed’s cautious stance on inflation may limit gold's potential for significant price increases.
GOLD (XAU/USD) – Technical Analysis
Gold prices are trading at $2,649.84, up 0.04%, as the precious metal holds within a tight consolidation range near its pivot point of $2,639.12.
On the 4-hour chart, immediate resistance is seen at $2,662.21, with further hurdles at $2,676.49 and $2,692.86, reflecting a strong bullish zone if prices sustain above the pivot level.
Immediate support lies at $2,624.44, with deeper levels at $2,603.20 and $2,583.91, marking critical zones for bearish shifts.
The technical setup aligns with a cautiously bullish bias. The 50 EMA at $2,632.77 is acting as a dynamic support level, reinforcing the upward trend.
The RSI at 56 indicates moderate bullish momentum without signs of overbought conditions, providing room for price advancement.
A clean break above $2,662.21 could trigger buying interest, pushing prices toward the next resistance at $2,676.49.
Conversely, a breach below $2,639 may lead to a retest of support at $2,624.44, signaling potential bearish pressure.
Traders are advised to consider long positions above $2,640, with a take-profit target at $2,662 and a stop-loss at $2,628.
Market sentiment hinges on upcoming U.S. economic data, which could influence gold’s safe-haven appeal.
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