In the early hours of the European session on Thursday, the gold price (XAU/USD) is showing modest intraday losses. However, it has not seen a significant continuation of selling and remains within a well-known trading range.
Overnight, a number of influential members of the Federal Open Market Committee (FOMC), including Federal Reserve Chair Jerome Powell, made hawkish remarks. These remarks have strengthened the expectation that the US central bank will be cautious about rate cuts. As a result, US Treasury bond yields have rebounded slightly from their lowest closing levels in over a month, putting downward pressure on the non-yielding gold.
The generally positive market sentiment is also affecting the demand for gold, which is traditionally seen as a safe haven. Nevertheless, ongoing geopolitical risks such as the escalating Russia-Ukraine conflict, concerns about trade wars, and political unrest in France and South Korea are providing some support for the XAU/USD. Additionally, a slight decline in the US Dollar is helping to limit the losses of the precious metal. Traders are also being cautious and refraining from making large bets ahead of the crucial US Nonfarm Payrolls (NFP) report due on Friday.
Gold price traders are hesitant to take a clear directional stance due to a mix of factors. The Federal Reserve’s Beige Book, released on Wednesday, indicated that US economic activity has expanded moderately in most regions since early October. Inflation is rising at a modest pace, and businesses are optimistic about the future.
St. Louis Fed President Alberto Musalem stated that it might be appropriate to pause rate cuts as early as the December meeting, as the risks of cutting borrowing costs too quickly are greater than those of not cutting enough. Fed Chair Jerome Powell noted that the US economy is in good shape and stronger than expected, and the central bank can be more cautious in reducing rates towards the neutral level. San Francisco Fed President Mary Daly also said there is no rush to lower interest rates and that more work is needed to achieve the 2% inflation target and sustainable economic growth.
Speculations that the policies of US President-elect Donald Trump could reignite inflation have led to the belief that the Fed might halt rate cuts or even raise them again. This has caused a modest increase in US bond yields. The yield on the 10-year US government bond, which had hit its lowest closing level since October 21, has rebounded, exerting some downward pressure on gold on Thursday.
Meanwhile, the US Dollar has struggled to gain significant momentum. Concerns that Trump’s trade tariffs could trigger a second wave of global trade wars are providing some support for the gold price. Traders are now looking forward to the release of the US Weekly Initial Jobless Claims later on Thursday for some market direction. However, the main focus remains on the highly anticipated US NFP report on Friday.
From a technical analysis perspective, the breakdown of the multi-day ascending channel this week has been a significant signal for bearish traders. However, the neutral oscillators on the daily and 4-hour charts suggest that it is advisable to wait for a clear break below the recent trading range support, around the $2,630 area, before expecting further losses. If the price falls, it could potentially drop below the weekly swing low of around $2,622-2,621 and head towards the $2,600 mark. The downward trend could extend further to the 100-day Simple Moving Average (SMA), currently near the $2,581 area, and then towards the November monthly trough of around $2,537-2,536.
On the upside, the $2,655 area is likely to act as an immediate resistance, followed by last Friday’s swing high of around $2,666. If there is a significant increase in buying, leading to a break above the $2,677-2,678 level, the gold price could aim to regain the $2,700 milestone. Any further upward movement is likely to face strong resistance near the $2,721-2,722 supply zone. A decisive break above this level could shift the market sentiment in favor of bulls and potentially lead to a significant upward move in the near future.
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