Gold prices have further retreated from the $2,620 mark, as the US Dollar gains strength supported by positive economic data. The release of strong US GDP and Jobless Claims figures has bolstered the narrative of a resilient US economy, as presented by the Federal Reserve.
The Federal Reserve’s recent actions and projections have had a profound impact on the market. While the Fed cut rates by 25 basis points to the 4.25%-4.50% range as expected, it also raised its growth and inflation expectations and reduced the projected number of rate cuts for 2025. Fed Chairman Jerome Powell’s hawkish tone added to the market’s reaction, leading to a risk-averse sentiment that saw the US Dollar Index (DXY) surge to two-year highs and weighed on gold and equities.
The US economic data has been impressive. The third quarter GDP growth was revised upwards to 3.1% annualized, outperforming the previous estimate of 2.8%. Weekly Jobless Claims dropped to 220K, beating expectations and indicating a healthy labor market. These figures have lent credence to the Fed’s stance and provided further support to the US Dollar.
Consequently, gold’s recovery has been stunted. XAU/USD has been unable to overcome the previous support area at $2,625 and has extended its downward move. The combination of a stronger US Dollar and higher US yields has created headwinds for gold’s price recovery. Technically, gold has failed to breach the resistance at $2,630, maintaining a bearish bias with the potential for further declines below the recent low of $2,580, towards the November trough at $2,540.
On the upside, gold would need to surpass the $2,625-$2,630 resistance zone, which includes the lows from November 28 and December 2, as well as the December 17 high at $2,650, to alleviate the bearish pressure. As the market continues to digest the Fed’s messaging and economic data, the outlook for gold remains challenging in the near term.
Related topics:
Gold’s Wobbly Path Amid Rising Yields and Fed Anticipation
Australian Dollar’s Struggle Amid Fed Policy Evolution
