Gold Price Surrenders Major Part of Intraday Gains; Downside Potential Seems Limited

Gold Price Surrenders Major Part of Intraday Gains; Downside Potential Seems Limited

Gold Price Update (XAU/USD): Friday, European Session

The gold price (XAU/USD) gave up a significant portion of its intraday gains, retreating to the lower end of the daily trading range during the first half of the European session on Friday. Despite the pullback, downside potential appears to remain limited amid a complex mix of technical and fundamental drivers.

Latest XAU/USD News:

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Technical Overview: XAU/USD

• Current Price: $2,668.21
  (Source: TradingView Lightweight Charts)

• Key Levels to Watch:

  • Resistance: The multi-week high of $2,726, with the psychological barrier and November 5 high at $2,750.

  • Support: The 50-day Simple Moving Average (SMA) at $2,671, followed by the 21-day SMA at $2,650 and last week’s low of $2,613.

• Indicators:

  • The 14-day Relative Strength Index (RSI) shows renewed upside momentum, staying comfortably above the 50-mark.

After facing rejection at higher levels on Thursday, gold prices found support near the 50-day SMA early Friday. A recovery from these levels could lead to a retest of the recent highs, though sustaining these gains might prove challenging without stronger bullish momentum.

Fundamental Overview

1. US Dollar and Treasury Yields:
A surge in the US Dollar and Treasury bond yields, driven by expectations of a hawkish Federal Reserve (Fed) stance, has limited gold’s upside. Markets anticipate the Fed will signal a pause in January following a widely expected 25 basis points (bps) rate cut at its December 17-18 meeting. This follows stronger-than-expected US Producer Price Index (PPI) data:

• Annual PPI rose 3.0% in November (vs. 2.6% expected).

• Annual core PPI grew 3.4% (vs. 3.2% expected).

The CME Group’s FedWatch Tool indicates that markets have fully priced in a December rate cut, but the prospect of a hawkish tone from the Fed continues to cap gold’s recovery.

2. Global Developments:
Renewed US-China trade tensions added complexity to the broader market sentiment. Reports from the Wall Street Journal highlighted China’s retaliatory measures against potential US tariffs, including regulatory probes, export restrictions on critical minerals, and supply chain pressures. This uncertainty has provided some support for gold as a safe-haven asset.

3. Day Ahead:
With no top-tier US economic data scheduled, traders will closely monitor broader market sentiment and end-of-week flows. Positioning ahead of next week’s Fed policy decision will also play a crucial role in driving gold prices.