Gold price (XAU/USD) has been on an upward climb for three consecutive days, yet it struggles to build strong, decisive momentum. Geopolitical tensions and trade war jitters are still propping up the safe-haven appeal of gold. However, the Federal Reserve’s hawkish stance, along with high US bond yields and a relatively strong US dollar, are putting a cap on its gains.
At the start of the new week, gold has been extending its recovery from last Thursday’s one-month low. Through the first half of the European session, it maintains a positive bias, bolstered by haven-seeking flows spurred by ongoing geopolitical risks. Russia’s vow of retaliation after Ukraine’s major drone attack on Kazan, and Israel’s bombing in southern Gaza, which led to a significant death toll, have contributed to the unease. Additionally, trade war fears have also nudged investors towards the precious metal.
On the other hand, the Fed’s indication last week of a slower rate-cut pace in 2025 has kept US Treasury bond yields elevated and attracted dip-buying for the US dollar on Monday. This has restricted the growth of non-yielding gold, making it wise to wait for more robust buying before anticipating further gains. Traders are now looking to the Conference Board’s Consumer Confidence Index for new market impetus.
The US dollar did pull back from a two-year peak on Friday after the release of the US Personal Consumption Expenditure (PCE) Price Index, which showed some moderation in inflation. November’s overall PCE inflation rose to 2.4% year-on-year from 2.3% in October, while the core PCE, excluding volatile food and energy prices, was at 2.8%, matching October but falling short of the 2.9% expectation. Personal Income growth also decelerated, and consumer spending had a mixed reading.
From a technical angle, while surpassing the 23.6% Fibonacci retracement of the recent pullback from the one-month peak is favorable for bullish traders, the negative oscillators on daily and 4-hour charts call for caution. The 38.2% Fibonacci level, around $2,637, currently acts as an immediate obstacle before the $2,643 – $2,647 congestion zone, which aligns with the downward-sloping 200-period Simple Moving Average on the 4-hour chart. If gold can break through this key point, further appreciation may follow. On the downside, the $2,616 – $2,615 area, the 23.6% Fibonacci level, offers immediate support, with the $2,000 mark and the $2,583 monthly swing low as subsequent fallback positions. Any strong selling from here could trigger further short-term losses.
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