gold prices have recently bounced back from their weekly lows, currently hovering around $2,650 as traders await the Federal Reserve’s upcoming policy announcement. The US Dollar remains sluggish, with Treasury bond yields stabilizing amidst a cautious market atmosphere. Despite this modest recovery, gold continues to face downside risks, reflective of prevailing bearish sentiment.
This week, gold prices struggled to maintain upward momentum, dropping on Tuesday to their lowest levels in six days at $2,633. The downward trend was largely influenced by sustained interest in US Treasury bonds, as market participants anticipated that the Fed might pause its easing cycle early next year following stronger-than-expected US retail sales data. The report revealed a 0.7% increase in retail sales for November, surpassing expectations of a 0.5% rise.
As these developments unfolded, Treasury yields experienced a slight pullback due to increasing risk aversion in global markets. This cautious stance caused traders to limit their engagements in riskier assets, subsequently allowing gold prices to recover to around $2,640 by the end of the session.
The market continued to exhibit risk-averse behavior on Wednesday, with traders hesitant to commit to positions in the US Dollar. Consequently, gold prices are fluctuating within a narrow range. The next move in gold will likely depend on the Fed’s policy communications, including economic forecasts and remarks from Fed Chairman Jerome Powell during his press conference.
If the Fed’s Summary of Economic Projections indicates fewer anticipated rate cuts for the upcoming year, the US Dollar may experience upward pressure, negatively impacting non-yielding assets like gold . Additionally, Powell’s commentary could shed light on future rate cut timelines, particularly regarding inflation perspectives. Currently, technical indicators suggest more downside risk for gold , with immediate resistance at the 21-day Simple Moving Average of $2,655. A significant rally would require sustained trading above $2,672, while support exists at the recent low of $2,633. Should this level break, the focus may shift to the December 6 low of $2,613, followed by the $2,600 level.
