Gold prices surged for the third consecutive day, rising by 0.35% as safe-haven demand increased due to growing concerns over President-elect Donald Trump’s proposed policies and the United Kingdom’s ongoing budget crisis. As of writing, XAU/USD trades at $2,671.
Geopolitical Tensions Fuel Gold’s Rise
On Wednesday, CNN reported that Trump might declare a national economic emergency, potentially granting him the authority to impose tariffs on both adversaries and US allies. Meanwhile, during Thursday’s overnight session, UK Gilt yields spiked above 5%, marking their highest levels since 1998, further intensifying global market unease.
As US financial markets were closed in observance of former President Jimmy Carter’s National Day of Mourning, Federal Reserve (Fed) officials made headlines with their comments on interest rates. Fed Governor Michelle Bowman maintained a hawkish stance, urging caution in rate adjustments, while Kansas City Fed’s Jeffrey Schmid suggested that rates were “near” neutral. Philadelphia Fed’s Patrick Harker indicated that the central bank might pause due to uncertainty, while Boston Fed’s Susan Collins emphasized a gradual approach to rate cuts in the current economic outlook.
Focus on Key Economic Data
Traders are now turning their attention to the release of December’s US Nonfarm Payrolls data and the University of Michigan (UoM) Consumer Sentiment report, which could offer further insight into the economy’s direction.
Gold and the US Dollar Maintain Modest Momentum
Despite higher US real yields, which rose by two basis points to 2.29%, gold prices remain resilient, shrugging off the impact of rising yields. The US Dollar Index (DXY), which tracks the Greenback against a basket of six major currencies, rose by 0.16%, reaching 109.18.
Additional labor market data released on Thursday showed a notable decline in layoffs, with the US Challenger Jobs report for December revealing a drop to 38,792 job cuts, compared to 57,727 in November. This development further fueled expectations of a slower pace of Federal Reserve tightening. The December Fed funds futures contract now prices in 54 basis points of easing, while minutes from the December FOMC meeting indicated that the central bank is nearing the point where it would be appropriate to slow the pace of tightening.
Meanwhile, the World Gold Council reported that physically backed gold exchange-traded funds (ETFs) saw their first inflow in four years, signaling renewed investor interest in the precious metal.
Technical Outlook for Gold
Gold prices have maintained a steady upward trajectory, forming a series of higher highs and higher lows after bouncing off the 50-day Simple Moving Average (SMA) at $2,646. This has propelled XAU/USD towards the $2,670 mark.
Should the bullish momentum continue, key resistance levels lie at $2,700, followed by the December 12 high of $2,726, and the all-time high (ATH) of $2,790.
On the downside, if sellers manage to push XAU/USD below the 50-day SMA, support levels will be tested at the 100-day SMA at $2,630. Further losses could lead to a decline toward the $2,600 mark, with the 200-day SMA at $2,500 as the next significant support level.
With market sentiment influenced by geopolitical factors and economic data, all eyes are now on the upcoming NFP release for clues on gold’s next move.
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