Gold price (XAU/USD) stays under pressure as markets await the Federal Reserve’s (Fed) final monetary policy decision of the year. The precious metal shows limited movement, trading flat on Wednesday after rebounding from a one-week low.
Factors Weighing on Gold Price
Anticipation of Hawkish Fed Guidance
The Federal Reserve decision is expected to cut interest rates by 25 basis points (bps). However, projections on future economic performance and interest rate hikes suggest a more hawkish stance. This outlook influences market sentiment, adding to the challenges gold faces.
Strong US Economic Data and Gold Price
Recent data highlights a robust US economy:
- Retail Sales Growth: November’s retail sales increased by 0.7%, surpassing October’s upwardly revised 0.5% rise. This data exceeded the anticipated 0.5% growth.
- Consumption Contribution: Accounting for over 60% of the US GDP, rising retail sales reinforce confidence in the economy.
- Services Activity: Earlier reports showcased unexpected growth in services, signaling strong fourth-quarter economic health.
Such indicators bolster investor confidence in US economic resilience, dampening gold’s appeal as a safe-haven asset.
Rising US Treasury Yields
High inflation and stable economic activity have prompted investors to reduce expectations of significant monetary easing. This shift has led to a rebound in US Treasury yields, adding downward pressure on gold prices.
Technical Analysis of Gold (XAU/USD)
Gold is consolidating losses with resistance levels capping any upward attempts:
- Support Levels: Immediate support lies at $2,630, with stronger support at $2,615-$2,605, the neckline of a potential double top.
- Resistance Levels: Upside is limited at $2,665, followed by $2,690.
- Bearish Trend: The broader bearish trend remains intact, with potential for deeper corrections toward November’s low of $2,540.
Market Sentiment and Future Outlook
Futures markets, as indicated by CME Group’s FedWatch Tool, show a 25 bps rate cut is almost fully priced in. However, expectations for more than two quarter-percentage cuts in 2025 remain below 30%. This cautious sentiment supports the ongoing pressure on gold.
Conclusion
Gold prices continue to struggle amid anticipation of a hawkish Federal Reserve decision and strong US economic data. While technical factors provide support at specific levels, broader market dynamics suggest limited upside potential.
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