Gold price (XAU/USD) has pulled back on Wednesday, settling into the $2,620 range. This decline stems primarily from the strengthening US Dollar (USD), which heavily influences gold prices due to its role as the currency in which gold is traded. A rising USD often results in gold prices moving lower.
Gold Price Today: Recovery Halts Midway
Earlier this week, gold recovered from eight-week lows around $2,530. This rebound was driven by rising safe-haven demand. The demand surged following geopolitical tensions, particularly after Russia updated its conditions for using nuclear weapons. Analysts interpreted this as a warning toward Ukraine and its allies after the U.S. allowed Ukraine to use long-range ATACMS missiles for strikes on Russian targets.
The Strengthening US Dollar
Gold’s retreat on Wednesday is closely tied to the USD gaining strength. Markets have adjusted expectations for a Federal Reserve (Fed) rate cut in December, dropping the likelihood to 60%, down from an earlier certainty of 100%. Initially, markets anticipated at least a 25 basis point (bps) cut. However, stronger U.S. economic data and policy developments under President Trump have shifted these expectations.
Higher interest rates tend to attract foreign capital inflows, which boosts the USD’s value. Trump’s proposed policies—like tariffs, lower taxes, and deregulation—further support this trend. Tariffs can drive inflation, higher spending power from tax cuts can fuel demand, and a relaxed regulatory approach enhances business growth. Together, these factors contribute to a stronger dollar, which typically pressures gold prices downward.
Technical Analysis: XAU/USD Maintains a Short-Term Uptrend
From a technical perspective, gold continues to show signs of a short-term uptrend despite recent pullbacks. On Wednesday, XAU/USD moved above a critical trendline, indicating the potential for further upside.
Key Levels to Watch
- A break above $2,642, Wednesday’s high, could signal further bullish momentum.
- The next resistance level sits at $2,686, a peak reached on September 26.
Gold remains in a long-term uptrend but a medium-term downtrend. These conflicting trends introduce risks of volatility in both directions, influenced by macroeconomic developments and market sentiment.
Conclusion
Gold prices are shaped by multiple factors, including geopolitical events and USD strength. As the Fed’s rate decision approaches and international dynamics evolve, market participants should monitor key levels and trends. For daily insights on gold price movements, check the Daily Gold Signal website and explore their Daily Gold Update section for expert analysis.
