Gold price has regained positive momentum after Thursday’s pullback from a multi-month peak. Geopolitical risks, trade war fears, and expectations of a Fed rate cut are factors that benefit the commodity. However, expectations of a less dovish Fed and elevated US bond yields may limit its growth.
Geopolitical Tensions and Fed Rate Cut Bets Drive Gold
Key Factors Affecting Gold’s Demand
During the Asian session on Friday, gold price (XAU/USD) attracted some dip-buyers and reversed part of the previous day’s slide from a five-week high near $2,726. Geopolitical risks from the Russia-Ukraine war and Middle East tensions, along with concerns about US President-elect Donald Trump’s tariff plans, boost safe-haven demand. Also, the market’s belief that the Federal Reserve will cut rates for the third consecutive time at the end of next week’s December policy meeting benefits the non-yielding gold.
Signs of Stalled Inflation Progress and Its Impact on Gold
How Fed’s Stance Affects Gold and the Dollar
Signs that inflation progress towards the Fed’s 2% target has stalled suggest a more cautious Fed stance on rate cuts. This supports elevated US Treasury bond yields and the US Dollar, which may limit gold price gains. Traders may wait for the outcome of the FOMC meeting next Wednesday. Investors will look for cues about the Fed’s rate-cut path to determine the direction of the Greenback and gold.
Geopolitical Developments and Their Impact on Gold
Escalating Tensions and Haven Flows
Gold price draws support from haven flows, but its upside seems limited. Ukraine has fired US-supplied missiles at Russian territory, and Russian forces are near a key eastern Ukraine city. Israel’s stance on its military presence in Syrian territory also marks an escalation. These geopolitical tensions drive some haven flows towards gold amid expectations of a Fed rate cut.
Inflation Figures and Their Significance for Gold
How Inflation Data Affects the Fed’s Stance and Gold
The latest US consumer inflation figures and Producer Price Index (PPI) data suggest stalled inflation progress. The markets have priced in a 25 basis points Fed rate cut next week. The PPI data indicates that the Fed may be more cautious about rate cuts, which could limit gold as it supports the US Dollar.
Technical Perspective on Gold Price
Resistance and Support Levels for Gold
From a technical perspective, if gold price rises above $2,700, it may face resistance near $2,725 – 26 or the monthly high on Thursday. Further up, it could reach $2,735 and then the $2,748 – 2,750 supply zone. The next barrier is near $2,775, and above that, bulls may aim for the all-time peak near $2,800. On the downside, $2,675 – 2,674 is a strong support. A break below could lead to further losses towards $2,658 – 2,656 and then potentially $2,632 – 2,630 and $2,600.
Related topics：
