Gold prices (XAU/USD) saw a modest rebound during Asian trading on Friday, recovering part of the prior session’s dip from a five-week high near $2,726. Safe-haven demand, fueled by geopolitical tensions in Eastern Europe and the Middle East, alongside uncertainty over US President-elect Donald Trump’s tariff policies, continued to provide support. Additionally, expectations of another Federal Reserve (Fed) rate cut next week added to the precious metal’s appeal.
Geopolitical Tensions Bolster Haven Flows
Renewed escalations in global conflicts have intensified safe-haven buying. Ukraine has launched US-supplied missiles targeting strategic Russian sites, while Russian forces advance toward Pokrovsk after prolonged fighting. In the Middle East, Israel’s announcement that its military will remain in occupied Syrian territory has further stoked tensions.
These developments, coupled with market expectations for a 25-basis-point rate cut by the Fed at its December meeting, have driven haven flows into gold. However, optimism for a dovish Fed stance is tempered by persistent inflationary pressures, suggesting caution in the central bank’s approach to future rate cuts.
Inflation Challenges and Fed Policy Outlook
US inflation data released this week has reinforced the Fed’s cautious tone. The Producer Price Index (PPI) rose 0.4% in November, with the annual rate accelerating to 3% from 2.6% in October. Core PPI also climbed to 3.4% year-over-year, surpassing expectations and indicating stalled progress toward the Fed’s 2% inflation target.
Market speculation suggests that Trump’s proposed expansionary policies could further stoke inflation, potentially forcing the Fed to adopt a more conservative stance on rate cuts. Elevated US Treasury yields and a stronger US Dollar have also limited gold’s upside potential.
Technical Analysis: Key Levels to Watch
Gold’s near-term trajectory hinges on its ability to break above the $2,726 resistance zone. A sustained move higher could target intermediate resistance at $2,735, followed by the $2,748-$2,750 supply area. A decisive break above $2,775 would open the path toward the October all-time high of $2,800.
On the downside, immediate support rests at the $2,675-$2,674 level. A breach of this zone could trigger further selling, pushing prices toward the $2,658-$2,656 confluence, which includes the 50- and 200-period Simple Moving Averages (SMAs) on the 4-hour chart. A break below these levels would expose the $2,632-$2,630 region, with the psychological $2,600 mark as the next major support.
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