Gold prices (XAU/USD) maintained a positive bias during the first half of the European session, holding steady near the $2,650 resistance zone. However, prices remained confined within a well-established range, hovering below the $2,650–2,655 supply area, which has capped upside movement for the past two weeks.
The release of the U.S. Nonfarm Payrolls (NFP) report last Friday further supported expectations that the Federal Reserve (Fed) will implement a rate cut in December. This has kept U.S. Treasury yields subdued, providing a tailwind for gold, which benefits from a lower yield environment due to its non-yielding nature.
Additional support for gold came from geopolitical factors, including political unrest in South Korea, ongoing geopolitical tensions, and trade war concerns, which bolstered demand for the precious metal as a safe haven. However, modest strength in the U.S. Dollar (USD) has acted as a cap on gold’s gains. The dollar’s strength is driven by speculation that the Fed may adopt a less dovish stance, particularly as market expectations rise that U.S. President-elect Donald Trump’s policies may drive inflation higher.
Traders have also adopted a cautious approach ahead of the release of key U.S. inflation data later this week, with many choosing to remain on the sidelines.
U.S. Labor Market Data Fuels Rate Cut Expectations
The U.S. Bureau of Labor Statistics (BLS) reported that Nonfarm Payrolls increased by 227,000 in November, significantly outperforming expectations of 200,000 and marking a substantial recovery from the prior month’s revised 36,000. Meanwhile, the unemployment rate rose slightly to 4.2%, from 4.1% in October, reinforcing the view that the Federal Reserve may lower rates by 25 basis points during its upcoming meeting.
The University of Michigan’s preliminary consumer sentiment survey for December showed an increase to 74.0 from 71.8 in November, while one-year inflation expectations climbed to 2.9% from 2.6%. These figures suggest that inflation concerns remain in focus, despite improving consumer sentiment.
Several Federal Reserve officials weighed in on the economic outlook. Cleveland Fed President Beth Hammack emphasized the need for a modestly restrictive monetary policy but suggested that a further rate cut in December remained plausible. San Francisco Fed President Mary Daly cautioned that while inflation progress is encouraging, the Fed could resume tightening if price pressures intensify. Chicago Fed President Austan Goolsbee pointed to a stable labor market, noting that any decision to pause rate cuts would depend on evolving inflation and employment conditions. Fed Governor Michelle Bowman stressed the importance of a cautious approach, given that underlying inflation remains above the 2% target.
The anticipation that President-elect Trump’s policies could reignite inflationary pressures has fueled speculation that the Fed may adopt a less dovish stance, limiting further gains in gold.
Gold Price Faces Key Resistance Near $2,650–2,655 Zone
From a technical standpoint, gold prices face significant resistance just above the $2,650 mark. If prices manage to break through this level, the next major hurdle is expected near $2,666, followed by $2,672. A sustained move above $2,672 could trigger further buying and pave the way for a test of the $2,700 level, with potential for an extension towards $2,722.
Conversely, any pullback below the immediate support level of $2,630 could bring gold prices down to the $2,614–2,613 range. Additional support lies at $2,605–2,600, followed by the 100-day Simple Moving Average (SMA) around $2,586–2,585. A decisive break below this level could open the door to further downside, with the November swing low at $2,537–2,536 serving as the next key support level.
As traders await further economic data, including U.S. inflation figures later this week, gold’s price trajectory remains largely influenced by the interplay of geopolitical developments and U.S. monetary policy expectations.
Related topics:
- Gold Prices Drop Rs 2,500 Per Tola in Pakistan
- Gold Prices Decline from Record Highs in India on November 1
- India’s Gold Reserves Surge: RBI Reports 60% Increase in Domestic Holdings
