Gold prices (XAU/USD) dipped below $2,640 during the European trading session on Wednesday, hitting a fresh daily low after failing to sustain an intraday rise near the $2,650 supply zone. Despite modest gains earlier in the day, the precious metal continues to trade within a familiar range as investors await Federal Reserve (Fed) Chair Jerome Powell’s speech for clues on future interest rate policies. The speech is expected to provide insight into the Fed's stance on rate cuts, which could have significant implications for the US Dollar (USD) and, by extension, gold prices.
Market Context: Mixed Signals Weigh on Gold
Gold’s inability to maintain its upward momentum reflects the current uncertainty in financial markets. Easing fears of a severe slowdown in the US labor market, coupled with expectations that President-elect Donald Trump’s fiscal policies could stoke inflation, suggest the Fed may take a more cautious approach to rate cuts. This outlook has supported a modest rise in US Treasury bond yields, strengthening the USD and putting pressure on gold, which offers no yield.
However, geopolitical tensions, such as US tariff threats, ongoing conflict in the Middle East, and economic uncertainty in China, continue to provide a safety net for the precious metal. Traders remain hesitant to make aggressive directional bets ahead of Powell’s speech, which could set the tone for gold's near-term trajectory.
Key Drivers Impacting Gold Prices
US Labor Market ResilienceData from the US Bureau of Labor Statistics’ Job Openings and Labor Turnover Survey (JOLTS) showed a notable increase in job openings, rising to 7.74 million in October from 7.37 million in the prior month. This strong labor market performance, alongside inflation remaining above the Fed's 2% target, has led to speculation that the Fed may slow its rate-cutting cycle in 2024.
Fed’s Policy OutlookDespite expectations of a 25-basis-point rate cut in December, supported by the CME Group’s FedWatch Tool showing a 70% probability, several Fed officials have emphasized a cautious approach. San Francisco Fed President Mary Daly stated that the labor market is balanced and not fueling inflation, while Fed Governor Adrianna Kugler stressed the need for a meeting-by-meeting evaluation of policy decisions. Chicago Fed President Austan Goolsbee also pointed out that rates remain restrictive and could be eased over the next year if inflation trends favorably.
Geopolitical Risks and Economic ConcernsGeopolitical developments continue to influence gold prices. US President-elect Donald Trump’s pledge to impose significant tariffs on key trading partners, including Canada, Mexico, and China, has raised fears of escalating trade wars. Simultaneously, tensions in the Middle East flared as Israel launched its largest airstrikes on Lebanon since a ceasefire, in response to rocket attacks from Hezbollah. Meanwhile, China’s Caixin Services PMI fell to 51.5 in November, down from 52.0, highlighting concerns about the fragility of the world’s second-largest economy.
Technical Analysis: Bearish Bias in Focus
From a technical perspective, gold’s repeated failures to break above $2,650 signal a bearish consolidation phase. The recent breakdown below a short-term ascending channel further strengthens the bearish outlook. Neutral oscillators on the daily chart suggest limited upside potential in the near term.
Key levels to watch include the $2,622-2,621 support zone. A break below this could expose gold to further downside near the psychological $2,600 level. Additional selling pressure may push prices toward the 100-day Simple Moving Average (SMA), currently around $2,579-$2,578, with a retest of the November trough at $2,537-$2,536 also possible.
On the upside, immediate resistance lies at $2,655, followed by the $2,666 zone. A sustained break above these levels could see gold aiming for the $2,677-$2,678 region and potentially the $2,700 mark. Beyond this, the next major hurdle lies at $2,721-$2,722, where a decisive move could shift the bias back in favor of bullish traders.
Outlook: Balancing Risks and Opportunities
Gold’s trajectory remains uncertain as traders weigh competing factors. On the one hand, resilient US economic data and the Fed’s cautious policy stance may limit gold’s upside potential. On the other hand, persistent geopolitical risks and economic vulnerabilities in major global economies could lend support to the safe-haven asset.
The market’s immediate focus will be on Powell’s speech and its implications for the Fed’s monetary policy outlook. Meanwhile, traders will also monitor broader geopolitical developments and key economic indicators, such as the upcoming US Nonfarm Payrolls report, for further direction.
In the near term, gold is likely to remain range-bound, with price action driven by evolving market sentiment and external shocks. As such, both bullish and bearish traders will need to exercise caution, keeping a close eye on critical levels and unfolding developments.
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