gold prices have shown a significant recovery from nearly two-month lows, gaining traction during the Asian session on Wednesday. Traders noted a rebound from the recent trough around the $2,590 – $2,589 level, marking an end to a three-day losing streak. This uptick, occurring without clear fundamental drivers, suggests market repositioning ahead of important U.S. consumer inflation data that could reshape expectations surrounding the Federal Reserve’s monetary policy decisions.
As the market awaits this critical information, the US Dollar is consolidating after reaching highs not seen since early May. The rise in the dollar, amid growing concerns over potential protectionist tariffs from the new presidential administration, has contributed to a cautious tone in equity markets, further supporting gold as a safe-haven asset. Nevertheless, expectations that expansionary fiscal policies could spur inflation place a ceiling on gold ’s potential gains and hinder aggressive interest rate cuts by the Federal Reserve.
gold ’s ability to recover may be hampered by investor optimism regarding proposed economic policies that could enhance inflationary pressures. The dollar’s ascent below the $2,600 level has added to the bearish sentiment surrounding gold , which is influenced by the likelihood of rising inflation limiting the Fed’s capacity to reduce interest rates. Meanwhile, Fed officials have expressed uncertainty about inflation trends, suggesting potential risks could lead to a pause in rate cuts if inflation figures exceed expectations prior to the upcoming Federal Open Market Committee (FOMC) meeting.
Analysts caution that gold will need to establish a foothold below the $2,600 level for bearish momentum to persist. Technical indicators reflect weak signals in the market, suggesting limited bullish potential in the near term. While a brief uptick might present selling opportunities, resistance around the $2,630 – $2,632 range could restrain further advances. On the other hand, a decline below $2,600 could trigger a broader sell-off, potentially leading prices down to the $2,540 support level, which is fortified by significant moving averages.
