Gold prices have remained relatively stable, hovering around the $2,610 mark, as investors adopt a more cautious outlook on U.S. interest rates. The broader market sentiment continues to favor a stronger U.S. Dollar, bolstered by expectations that the Federal Reserve will slow the pace of rate cuts in the coming year. Fed officials have indicated that fewer cuts are likely than initially expected, with projections suggesting the federal funds rate could reach 3.9% by the end of 2025. This adjustment comes amid a slower-than-anticipated disinflation process and ongoing uncertainty regarding President-elect Donald Trump’s policy direction on immigration, trade, and taxes.
The latest release of the Federal Reserve’s Summary of Economic Projections (SEP) has led to a rise in U.S. Treasury yields, which, in turn, has placed downward pressure on gold. Higher yields tend to increase the opportunity cost of holding non-yielding assets like gold, contributing to the precious metal’s recent decline.
Key Economic Data Could Affect Gold’s Trajectory
Market participants are also awaiting crucial economic data in the coming days. Initial Jobless Claims data, scheduled for release on Thursday, could introduce volatility for the U.S. Dollar. Furthermore, the Nonfarm Payrolls report for December, due in early January, will be closely monitored, as the labor market remains a key determinant of the Fed’s monetary policy decisions. Despite these developments, gold has struggled to break out of its current trading range, remaining under pressure in the near term.
XAU/USD Technical Outlook: Testing Key Support Levels
From a technical standpoint, XAU/USD is facing significant resistance. The price is currently testing the critical 100-day Simple Moving Average (SMA) support level at $2,610, a key indicator that has held up in recent months. A sustained break below this level could open the door for further downside, while any rebound would likely encounter resistance in the $2,650-$2,670 range. Traders are closely watching these levels, as they may signal either a reversal or a continuation of the bearish trend.
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