Gold prices (XAU/USD) faced difficulty maintaining momentum on Tuesday, trading with a slight positive bias just above the $2,640 mark during the early European session. Despite geopolitical tensions, including the ongoing Russia-Ukraine conflict and rising tensions in the Middle East, alongside concerns over U.S. President-elect Donald Trump’s protectionist tariff proposals, gold’s upward movement remains capped by a hawkish stance from the Federal Reserve.
Market sentiment was slightly buoyed by a dip in the U.S. dollar (USD) and persistent concerns surrounding global trade disruptions and inflation. The U.S. President-elect’s plans to introduce tariffs are expected to stoke further inflationary pressures, which traditionally support the safe-haven appeal of gold. Additionally, military actions, such as Ukraine’s new offensive in the Kursk region and Israel’s ongoing operations in Gaza and Syria, have kept investors wary, further bolstering demand for the precious metal.
However, gold’s upside potential remains limited by the Federal Reserve’s continued focus on inflation control. The Fed’s December projections indicated a more cautious approach to interest rate cuts in 2025, with concerns that inflation could surge again. San Francisco Fed President Mary Daly and Fed Governor Lisa Cook both highlighted that despite progress in reducing inflation, it remains above the central bank’s 2% target. This has supported higher U.S. Treasury yields, lending strength to the U.S. dollar and limiting gold’s appeal, as it offers no yield.
Traders are also cautious ahead of key economic releases this week, including the Federal Open Market Committee (FOMC) meeting minutes on Wednesday and the U.S. Nonfarm Payrolls (NFP) report on Friday. These events are likely to further shape expectations for the Fed’s monetary policy and market dynamics.
From a technical perspective, gold’s recent performance suggests a cautious outlook for bearish traders. The precious metal has managed to stay above the 100-day Simple Moving Average (SMA), signaling a potential for near-term upside, although key resistance levels remain intact. A move above $2,655 could challenge the $2,665 resistance zone, with a further rally potentially targeting $2,681–2,683 and $2,700. Conversely, the $2,626 mark, supported by the recent swing low near $2,615–2,614, offers near-term support. A breakdown below these levels could trigger deeper losses, potentially revisiting the December swing low around $2,583.
As the week progresses, traders will closely monitor economic indicators, with the U.S. ISM Services PMI and JOLTS Job Openings data on Tuesday providing further clues about the health of the economy. Meanwhile, the focus remains on upcoming employment reports, which could influence both gold and broader market sentiment.
Related Topics:
