Gold prices (XAU/USD) saw a modest rebound near the $2,669 level on Wednesday, maintaining a steady upward trajectory during the first half of the European session. The US Dollar (USD) continued its retreat from the two-year highs reached earlier this week, following the release of a softer-than-expected US Producer Price Index (PPI) on Tuesday. This USD weakness provided significant support to gold prices, although concerns over a hawkish Federal Reserve (Fed) and a risk-on market sentiment may limit further gains.
Investor confidence was bolstered by easing concerns over potential disruptions from US President-elect Donald Trump’s trade tariffs, which have helped drive a generally positive tone in equity markets. Additionally, the robust US jobs report from earlier in the week reinforced expectations that the Fed will pause its rate-cutting cycle later this month. As a result, US Treasury bond yields remained elevated, which could discourage traders from making aggressive bullish moves in the non-yielding gold market.
Traders are now focusing on the upcoming US Consumer Price Index (CPI) report for further direction. The gold price has benefited from the retreat of the USD, but the outlook remains closely tied to US inflation data, which could provide fresh impetus to the market.
A Bloomberg report from Monday indicated that President-elect Trump’s economic advisors are considering a gradual monthly increase in tariffs, which has added to market volatility. Meanwhile, the US inflation data continued to influence markets, with the Producer Price Index rising by just 0.2% in December, while the core gauge remained unchanged. This softer inflation data, coupled with the strong US jobs report, has left investors uncertain about the Fed’s next moves on interest rates, putting the USD bulls on the defensive.
Geopolitical tensions also remain a backdrop to market movements. Ukraine launched its largest air attacks on Russia since the war began nearly three years ago, prompting a response from Russia. Additionally, Israel intensified its strikes on Gaza, leading to casualties, while negotiators in Qatar approach a potential breakthrough in ceasefire talks.
With these factors in mind, investors are now closely watching the US CPI report for indications of future Fed policy and USD demand. This data will likely influence the XAU/USD price movement in the near term.
Technical Outlook: Gold Eyeing $2,690 Resistance Level
On the technical front, gold prices have shown positive momentum, with support for potential dip-buyers emerging near the $2,663-$2,662 region. However, if selling pressure resumes, the next key support level lies between $2,636 and $2,635, where the 100-day Exponential Moving Average (SMA) and an ascending trendline converge. A decisive break below this level would likely shift market sentiment toward the bearish side, opening the door for further declines.
On the upside, gold faces immediate resistance around the $2,690 zone, with a break above this level potentially paving the way for further gains. If the upward momentum continues, gold could test the $2,700 mark, with the next major target around $2,716-$2,717, near the December swing high at $2,726.
As traders await the US CPI report, gold’s price action will likely remain driven by USD dynamics and broader market sentiment, setting the stage for either a continuation of the recent uptrend or a reversal toward lower levels.
Related topics:
- India Surpasses China in Gold Purchases, Buying 51% More in Three Months
- Gold Rates Skyrocket in Chennai on Diwali, 24K Gold Exceeds Rs. 81,000 Per 10 Grams
- Gold and Silver Prices Rise Across India on January 13, 2025
