Gold retreated after reaching weekly highs, with mixed signals from the Fed. Expectations for a rate cut in the upcoming meeting are high, but the central bank is openly cautious for future policy decisions. Increased demand from central banks on one hand and geopolitical tensions on the other may create uncertainty for gold.
Traders still widely expect the Federal Reserve to cut interest rates by 25 basis points next week after a new report showed inflation rose in November, in line with expectations. But persistent price pressures may show signs of concerns that progress toward the Fed’s 2% target may be stalling.
The U.S. Dollar limited gold’s upside as traders favored the USD amid increased doubts over the long-term outlook for inflation and interest rates. Wednesday’s CPI reading showed inflation at its strongest level in seven months, a trend that is expected to keep the Fed cautious over further monetary easing.
Those concerns could prompt officials to become more cautious in the number of rate cuts they anticipate in 2025. Now, they are waiting for more confirmation that inflation is on track to reach their goal.
The Fed’s rate cuts may also be constrained by inflationary pressures brought on by Trump’s proposed policies, such as tariffs and tighter immigration controls, which may be bad news for gold.
In November, following the U.S. elections, China increased its holdings of gold for its reserve after suspending purchases for six months and implementing economic stimulus plans, which caused gold prices to rise.
Technical Analysis
Source: TradingView
XAUUSD has surged after its breakout from $2,640, breaching several resistance lines which indicates the price is in a strong bullish momentum. A double top pattern formed with the November 22 high at $2,713 along with the RSI (14 Day) formed a bearish divergence with price, which could show bearish signs.
Bears may focus on the $2,680 level as a major support level if the price fails to hold ground. However, if bulls can continue to take control, they may focus on the $2,740 level as a resistance line.
