Gold price (XAU/USD) continues to attract dip-buying opportunities near the $2,669 mark as of Wednesday, maintaining a steady upward trajectory during the early European session. The weakening US Dollar (USD), following a softer-than-expected US Producer Price Index (PPI) report released on Tuesday, supports this rise. However, the ongoing risk-on sentiment and hawkish Federal Reserve (Fed) expectations could limit significant gains.
USD Weakness Provides a Boost to Gold Prices
The USD’s retracement from its two-year high has supported gold prices. The softer PPI data, reflecting weaker wholesale inflation, contributed to this decline. Additionally, reduced fears surrounding disruptive trade tariffs proposed by US President-elect Donald Trump have bolstered investor confidence, leading to a positive equity market sentiment. This risk-on environment, combined with robust US jobs data, suggests the Fed may pause its rate-cutting cycle. Consequently, these factors have kept US Treasury bond yields steady, which may prevent aggressive bullish bets on gold price.
Key Highlights:
- US PPI rose 0.2% in December, with the core measure remaining flat.
- The risk-on mood, evident from rising equity markets, caps gold’s potential upside.
Geopolitical Tensions and Market Focus on US CPI Report
Ongoing geopolitical developments, including escalated airstrikes between Ukraine and Russia and intensified Israeli strikes on Gaza, add to market uncertainties. While these situations might influence global risk sentiment, traders are more focused on the upcoming US Consumer Price Index (CPI) report. This report will provide clarity on the Fed’s policy direction and shape USD demand, which will, in turn, affect gold prices.
Geopolitical Updates:
- Ukraine’s largest air attacks on Russia in three years.
- Israeli strikes in Gaza claim at least 13 lives amid ceasefire discussions.
Technical Analysis: Gold Eyes Key Resistance at $2,690
Gold prices have been steadily climbing towards the $2,690 mark, which serves as a crucial resistance level. Technical indicators on the daily chart show growing bullish momentum. However, a decisive break above $2,690 is needed to confirm further gains, potentially pushing the price towards $2,716-$2,717 or even the December swing high of $2,726.
Support and Resistance Levels:
- Immediate support: $2,663-$2,662 zone.
- Key resistance: $2,690, followed by $2,700.
- Further upside targets: $2,716-$2,726 region.
Conversely, failure to sustain above current levels could trigger selling pressure. Gold might then test the $2,635-$2,336 support zone. A break below this region could signal a bearish trend.
Conclusion
As gold prices hover near critical levels, the US CPI report will play a pivotal role in determining the next trend. While USD weakness and geopolitical tensions provide a bullish backdrop, the risk-on sentiment and steady bond yields could act as headwinds.
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