Gold price update continues to trade within a narrow range, holding steady above the $2,650 mark during the early European session on Tuesday. Traders appear hesitant, waiting for clear signals regarding the Federal Reserve’s (Fed) future rate decisions before making significant moves. This cautious approach has kept the gold market subdued for the second consecutive day, ahead of the crucial Federal Open Market Committee (FOMC) meeting scheduled for Wednesday.

Factors Influencing Gold Price Stability

Strong US Treasury Yields and USD Performance

Anticipation of a more hawkish approach from the Fed bolsters high US Treasury bond yields. This environment strengthens the US Dollar (USD), which in turn creates headwinds for the non-yielding Gold price.

However, persistent geopolitical tensions, including the ongoing Russia-Ukraine conflict and unrest in the Middle East, bolster the safe-haven appeal of Gold. Despite the strong dollar, these risks help prevent a sharp decline in Gold prices.

Key Economic Indicators

Market participants are closely monitoring US economic data for further cues. For instance, the US Retail Sales figures, due later on Tuesday, are expected to provide short-term trading opportunities. Meanwhile, robust economic data released earlier has already influenced expectations for Fed policy:

• The S&P Global US Services PMI surged to 58.5 in December, marking a 38-month high.
• The Composite PMI rose to 56.6, marking a 33-month high, which offset a drop in the Manufacturing PMI to 48.3.

This strong performance signals resilience in the US economy, reinforcing the belief that the Fed might take a cautious approach toward further rate cuts.

Trader Sentiment Ahead of the FOMC Decision

Mixed Sentiment in the Market

Traders remain non-committed as they await Wednesday’s FOMC meeting outcome. According to the CME Group’s FedWatch Tool, markets have priced in a 25-basis-point rate cut. This has limited the upside for the USD and, in turn, supported Gold price update during the Asian session.

Global Geopolitical Risks

Additional geopolitical developments, such as new US sanctions on North Korea and Russia and escalating tensions in the Middle East, add layers of uncertainty. These factors may continue to influence Gold’s safe-haven demand in the coming days.

Technical Analysis: Key Levels to Watch

Immediate Support Levels

• $2,644-$2,643 Region: A one-week low reached on Monday, serving as a key support zone.
• $2,625 Area: A break below this level could pave the way for further declines.
• $2,600 Mark: A decisive breach here would likely trigger significant selling pressure.

Immediate Resistance Levels

• $2,664-$2,666 Region: The overnight swing high remains a strong barrier.
• $2,677 Level: A break above this level could see the price reclaim the $2,700 mark.
• $2,726 Zone: A sustained move beyond this area could signal a renewed upward trend for XAU/USD.

Conclusion: Cautious Optimism in the Gold Market

Gold prices are navigating a delicate balance, with traders closely watching both economic data and geopolitical developments. While elevated Treasury yields and USD strength pose challenges, ongoing global uncertainties offer underlying support to Gold’s safe-haven appeal.

For more detailed daily updates on gold prices, visit our Daily Gold Update section. Stay informed about the latest market trends and analysis by exploring our Daily Gold Signal page.