Gold price today, gold price (XAU/USD) surrenders a major part of its intraday gains and retreats to the lower end of the daily range during the first half of the European session on Friday.
Gold Prices Retreat Amid Strong Dollar and Fed Focus, but Downside Risks Remain Limited
The increasing market belief that the Federal Reserve (Fed) will take a cautious approach to interest rate cuts, coupled with signs that progress in reducing inflation to its 2% target has stalled, continues to support elevated US Treasury bond yields. This environment helps the US Dollar (USD) maintain its recent gains, reaching a new monthly peak, which acts as a headwind for the non-yielding yellow metal.
However, significant downside for gold prices appears limited as traders may choose to adopt a wait-and-see approach ahead of the highly anticipated two-day FOMC policy meeting starting next Tuesday. Additionally, ongoing geopolitical risks from the Russia-Ukraine conflict and tensions in the Middle East, along with concerns about US President-elect Donald Trump's tariff plans, may bolster demand for safe-haven gold. This context calls for caution before betting on a continuation of the previous day's sharp decline from a five-week high.
Recent developments, including Ukraine's targeted strikes with US-supplied missiles deep within Russian territory and the advance of Russian forces towards the eastern city of Pokrovsk, heighten geopolitical tensions. In the Middle East, Israel's military presence in Syria adds further complexity to the situation. These factors could drive haven flows into gold, especially with expectations that the Fed might lower borrowing costs during the December meeting.
Following the release of US consumer inflation figures, the markets seem to have fully integrated a 25 basis point rate cut into their expectations for next week. The US Bureau of Labor Statistics reported a 0.4% increase in the Producer Price Index (PPI) for November, with the annual rate rising from 2.6% in October to 3%. The annual core PPI also exceeded expectations, reinforcing the notion that progress in lowering inflation has stalled, prompting speculation that the Fed will adopt a more cautious stance moving forward.
From a technical standpoint, any further strength above the $2,700 mark is likely to encounter resistance in the $2,725-$2,726 range, near the monthly high reached on Thursday. If gold breaks through this resistance, it could move towards the $2,735 level and eventually challenge the $2,748-$2,750 supply zone. The next key barrier sits around $2,775, above which bulls may target the all-time high near $2,800 from October.
On the downside, the $2,675-$2,674 area has emerged as strong support. A decisive break below this level could trigger technical selling and open the door for further losses towards 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 this pivotal point could expose gold prices to a decline towards the $2,632-$2,630 range, ultimately testing the $2,600 mark.
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