The gold price (XAU/USD) is clinging to its gain and is close to a two-week high. It’s getting support from multiple factors during the Asian session on Tuesday. However, it lacks strong follow-through buying and remains below the two-week high it reached the previous day.
Factors Affecting Gold Price
Impact of US Policies: Investors think US President-elect Donald Trump’s policies will boost inflation. This might make the Federal Reserve (Fed) pause its rate-cutting cycle. That acts as a support for the US Dollar, which in turn limits the gains of gold as it’s a non-yielding metal.
Geopolitical Tensions: Geopolitical tensions in the Middle East rose over the weekend. Syrian rebels took control and President Bashar al-Assad had to flee to Russia. This drove haven flows towards gold, increasing its safe-haven demand.
Central Bank Buying: The People’s Bank of China announced on Saturday that it bought 160,000 fine troy ounces of gold in November. This ended a six-month pause in purchases and gives extra support to the gold price.
Tariff Concerns: Trump has pledged to impose big tariffs on America’s major trading partners like Mexico, Canada, and China. He also threatened a 100% tariff on ‘BRICS’ nations. This raises concerns about a new wave of global trade wars and supports the chances of gold making further near-term gains.
Fed Rate Cut Bets: The CME Group’s FedWatch Tool shows that traders are pricing in over an 85% chance that the Fed will lower borrowing costs by 25 basis points at its December policy meeting. But the recent hawkish remarks by Fed officials and the expectation that Trump’s policies could reignite inflation suggest the Fed might pause the rate-cutting cycle. This led to a bounce in US Treasury bond yields, which supports the US Dollar and caps gold’s rise.
Technical Outlook for Gold Price
Bullish Signs: From a technical perspective, the overnight breakout through and daily close above the $2,650 barrier is seen as a trigger for bullish traders. Oscillators on the daily chart are starting to show positive traction, which supports the idea of the gold price going up further. There’s a possibility that it could move towards reclaiming the $2,700 mark and then head towards the $2,720 – $2,722 supply zone.
Support Levels: The $2,650 resistance breakpoint, which is also where the 200-period Exponential Moving Average (EMA) is on the 4-hour chart, should now act as a strong immediate support. If it breaks below this convincingly, the next support is near the $2,625 – $2,620 area. And if it drops further, it could eventually reach the $2,600 mark. A break below the 100-day Simple Moving Average (SMA), currently around the $2,600 – $2,585 region, would set the stage for deeper losses and could drag the XAU/USD to the November swing low, around the $2,537 – $2,536 zone.
Key Event to Watch
The main event this week is the release of the US Consumer Price Index for November on Wednesday. This could guide Fed policymakers in their decision-making and also influence the gold price.
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