Gold prices (XAU/USD) have shown positive momentum for the second consecutive day on Friday, staging a recovery from a one-month low around the $2,013 region. This rebound comes as the 50-day Simple Moving Average (SMA) was touched the previous day. However, the intraday uptick is currently lacking follow-through, as uncertainty surrounding the Federal Reserve’s (Fed) stance on interest rate cuts remains a key factor. Traders are advised to exercise caution given the recent consolidative price movement within a familiar range, suggesting a degree of indecision in the market.
The release of US consumer price data on Thursday revealed an increase beyond expectations for December. Coupled with hawkish comments from Fed officials, this has fueled speculation that interest rates might remain higher for an extended period. However, market dynamics indicate a growing probability of a rate cut in March, acting as a potential headwind for US Treasury bond yields. The weakening of yields, in turn, undermines the US Dollar (USD) and provides support for the non-yielding gold prices.
In addition to monetary policy considerations, geopolitical tensions in the Middle East and ongoing concerns about the fragility of China’s economic recovery contribute to gold’s safe-haven appeal. Despite these supportive factors, gold prices remain confined within a multi-day trading band. As a result, prudence is advised, and traders may consider waiting for sustained follow-through buying before positioning for a more significant upward movement in XAU/USD. The current environment underscores the importance of monitoring both fundamental and technical factors to navigate the complexities of the gold market in the days ahead.
