Gold prices (XAU/USD) maintained a bullish tone during the early European session on Friday, trading just below a four-day peak of $2,657-2,658. Despite easing from its recent high, the precious metal remains in demand, driven by ongoing global uncertainties, including concerns over U.S. President-elect Donald Trump’s proposed trade tariffs and the persistent Russia-Ukraine conflict, which have led to increased haven flows into gold. Additionally, lower U.S. Treasury bond yields and a dip in the U.S. Dollar (USD) to a two-week low have provided further support to gold.
However, expectations that Trump’s economic policies could reignite inflationary pressures in the U.S., along with signs that inflation reduction efforts stalled in October, may limit the Federal Reserve’s ability to ease monetary policy further. This could dampen gold’s upside potential, as further declines in U.S. bond yields may be restricted, and the strengthening U.S. Dollar could pose a challenge to the non-yielding metal. As a result, analysts caution that strong follow-through buying is necessary to confirm that gold has established a near-term base around the $2,600 level.
Geopolitical Tensions and U.S. Economic Outlook Support Gold
The geopolitical landscape continues to support safe-haven demand. Russian President Vladimir Putin recently stated that Russia could use its new hypersonic missiles to target decision-making centers in Ukraine, escalating the ongoing conflict. Meanwhile, President-elect Trump’s pledge to impose tariffs on all goods entering the U.S. from Canada, Mexico, and China has fueled concerns about potential trade wars.
The U.S. Dollar has struggled to capitalize on modest gains from Thursday’s session. Traders are now pricing in a 70% likelihood that the Federal Reserve will cut interest rates at its December meeting, following mixed signals from the central bank. Minutes from the November Federal Open Market Committee (FOMC) meeting indicated divisions among committee members over the need for further rate cuts, adding to market uncertainty. Meanwhile, recent U.S. data, including the PCE report, showed that inflation reduction efforts stalled in October, reinforcing expectations that Trump’s policies could lead to higher inflation in the future.
Technical Outlook: Gold Eyes Key Levels
On the technical front, gold prices broke above the $2,649-$2,650 zone, which includes the 100-hour Simple Moving Average (SMA) and the 38.2% Fibonacci retracement level of the weekly decline, triggering some bullish momentum. However, the rally stalled near the $2,663-$2,664 region, which coincides with the 50% Fibonacci retracement level. This area is now seen as a critical resistance point, with any further gains likely to face resistance around $2,677 (61.8% Fibonacci level) and ultimately towards the $2,700 round number.
To the downside, the $2,650 region provides immediate support, with a break below potentially triggering a retreat to $2,633 (23.6% Fibonacci level) and the overnight swing low around $2,620. Further selling pressure could drive prices toward the monthly low near $2,605. A significant break below the $2,600 level could lead to deeper losses, with the 100-day SMA at $2,573 and the monthly low near $2,536 becoming key targets.
Market Conditions and Looking Ahead
With no major economic data due on Friday and U.S. stock markets closing early for the Thanksgiving holiday, market liquidity may be thin, potentially increasing volatility. Gold’s technical setup and ongoing geopolitical and economic uncertainties will likely continue to drive price action in the short term. Investors are advised to monitor key levels closely for further signs of directional movement.
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