Gold price (XAU/USD) shows a steady rise on Tuesday but struggles to maintain gains below yesterday’s high. Market sentiment remains cautious due to mixed fundamental factors. Geopolitical tensions from the Russia-Ukraine conflict and Middle East unrest continue to support the precious metal as a safe-haven asset. However, the Federal Reserve’s hawkish stance caps further gains for gold.
The US central bank recently indicated a slower pace of interest rate cuts in 2025. This outlook keeps US Treasury bond yields elevated, allowing the US Dollar (USD) to remain near a two-year high, which limits the appeal of non-yielding gold. As a result, traders are advised to wait for further confirmation before positioning for an extended recovery from the one-month low hit last week, especially amid thin trading volumes.
Federal Reserve Maintains Hawkish Outlook
Last week, the Federal Reserve adjusted its policy, indicating a cautious approach toward future rate cuts in 2025. This shift has raised concerns about potential policy changes under the incoming administration, affecting market dynamics. Meanwhile, the 10-year US government bond yield climbed to its highest level since May, while the US Dollar remains firm near recent highs. These factors contribute to capping gains for gold prices.
Israeli forces continue operations in Gaza, while Russian troops make advancements in eastern Ukraine. Additionally, US President-elect Trump has urged Ukraine to consider a ceasefire. These geopolitical developments add to the uncertainty in global markets.
Traders are now eyeing the Richmond Manufacturing Index, which, alongside US bond yields, will influence the USD and provide direction amid low liquidity on Christmas Eve.
Gold Price Faces Potential Bearish Movement
From a technical perspective, gold is showing signs of a bearish flag pattern on hourly charts following its recent recovery from a one-month low. Oscillators on the daily chart remain bearish, suggesting a potential downward move. To confirm this, a break below channel support around $2,600-$2,605 is necessary, which would open doors for further declines.
A sustained fall could push gold towards the monthly low of $2,583. If selling pressure continues, it could target the November swing low near $2,537-$2,536, potentially reaching the psychological level of $2,500.
Conversely, a breakout above the $2,633-$2,634 zone, close to Monday’s multi-day high, could serve as a strong resistance. A breakthrough might trigger short-covering and lead gold towards $2,654-$2,655. This level would act as a key turning point, likely negating the bearish bias and paving the way for a recovery towards $2,700.
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