Gold prices (XAU/USD) reversed an intraday dip to $2,620 on Thursday, briefly hitting a daily high during the early European session. However, the metal lacked strong bullish momentum, with investors remaining cautious amid rising concerns about global economic outlooks. U.S. President-elect Donald Trump’s tariff policies, coupled with escalating tensions from the Russia-Ukraine conflict, continue to provide support for gold as a safe-haven asset.
Despite these geopolitical factors, a series of positive economic reports from the U.S. have dampened enthusiasm for gold. U.S. Treasury yields rebounded modestly on Wednesday, after mostly positive macroeconomic data, fueling demand for the U.S. Dollar (USD) and limiting the upside for the non-yielding metal. A generally positive risk sentiment and relatively low trading volumes, due to a U.S. holiday, further restrained bullish movements in gold.
U.S. Economic Data Impacts Market Sentiment
On Wednesday, the U.S. Bureau of Economic Analysis (BEA) reported that the Personal Consumption Expenditures (PCE) Price Index rose to 2.3% year-on-year in October, up from 2.1% in September. This was accompanied by a slight increase in the core PCE Price Index, which excludes volatile food and energy costs. The core index rose 0.3% month-over-month, reaching 2.8% year-on-year from 2.7% the previous month.
Meanwhile, the U.S. economy grew at a solid 2.8% annual rate in the third quarter, driven by strong consumer spending, which rose 3.5%. Jobless claims also fell by 2,000 to 213,000, suggesting continued strength in the labor market.
However, the U.S. Durable Goods Orders came in weaker than expected, with a 0.2% increase in October, compared to a forecasted 0.5% rise. Excluding transportation, orders increased by only 0.1%. Despite this, the overall economic outlook remains positive, with the Federal Reserve expected to slow the pace of interest rate cuts, keeping pressure on gold prices.
Geopolitical Risks and U.S. Tariff Concerns Support Gold
Adding to concerns about the U.S. economy, Trump’s pledge to impose tariffs on a wide range of imports from Mexico, Canada, and China continues to raise fears about rising inflation. This, coupled with minutes from the Federal Open Market Committee (FOMC), indicated that the Fed could pause its rate cuts if inflation remains elevated.
Despite these economic developments, gold remains supported by geopolitical tensions, especially the ongoing Russia-Ukraine conflict. Gold prices have struggled to find support above key technical levels, such as the 100-period Exponential Moving Average (EMA) on the 4-hour chart, suggesting a cautious stance among bullish traders. Additionally, negative signals from technical oscillators on hourly and daily charts point to a potential downside risk for gold in the short term.
Outlook for Gold
For gold to sustain any bullish momentum, it would need to break above resistance levels around $2,638-$2,639, which could pave the way for a move toward the $2,658 region. A sustained push beyond that level could see gold prices rise to the next key resistance at $2,677-$2,678, with the $2,700 mark as a potential target.
On the downside, if gold fails to hold above $2,600, it could challenge the 100-day Simple Moving Average (SMA) near $2,570. A break below this support level could send gold toward the monthly swing low around $2,537-$2,536.
In summary, while geopolitical tensions and tariff concerns support gold as a safe haven, stronger U.S. economic data and rising Treasury yields are limiting the metal’s upward potential. Traders will need to monitor key support and resistance levels closely as market sentiment continues to evolve.
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