Gold Price Holds Above $2,600 Amid Risk-Off Sentiment, Easing US Yields, and Weaker USD

Gold price (XAU/USD) holds its positive tone during the first half of the European session on Friday, supported by a risk-off sentiment. Concerns over geopolitical tensions and trade war fears, coupled with the looming threat of a US government shutdown, drive safe-haven demand for the precious metal. Additionally, a modest retreat in US Treasury bond yields tempers the US Dollar’s (USD) recent rally to a two-year high, providing further support to Gold.

However, the Federal Reserve’s (Fed) hawkish indication of a slower pace of rate cuts in 2025 underpins US bond yields and strengthens the USD. This limits Gold’s ability to sustain its intraday recovery above the $2,600 level. Market participants now await the US Personal Consumption Expenditure (PCE) Price Index for fresh clues on the USD’s direction, which could influence XAU/USD later in the early North American session.

Gold price bulls appear hesitant amid the Federal Reserve’s (Fed) signals of a slower pace of rate cuts in 2025:

• The US House of Representatives failed to pass a spending bill on Thursday, increasing the likelihood of a government shutdown as the funding deadline approaches on Friday.
• Persistent geopolitical tensions and uncertainty over US President-elect Donald Trump’s proposed tariffs continue to drive safe-haven demand for Gold.
• US Treasury bond yields have eased from recent multi-month highs, limiting the US Dollar’s post-FOMC rally to a two-year peak and providing additional support for the yellow metal.
• The US Bureau of Economic Analysis revised third-quarter GDP growth to 3.1% annualized, up from the prior estimate of 2.8%, reflecting stronger-than-expected economic momentum.
• Weekly Initial Jobless Claims data showed filings fell to 220K for the week ending December 14, better than market expectations, underscoring resilience in the US labor market.
• The Fed’s hawkish outlook, supported by robust data, reinforces expectations for fewer rate cuts in 202 5, sustaining upward pressure on US bond yields and cappi ng gains for the non-yielding Gold.
• Traders remain cautious, awaiting Friday’s release of the US Personal Consumption Expenditure (PCE) Price Index, the Fed’s preferred inflation measure, for clearer market direction.

Gold price could face resistance near $2,625, the recent swing high

From a technical perspective, the post-FOMC decline below the 100-day Simple Moving Average (SMA) has triggered bearish sentiment. Oscillators on the daily chart show increasing negative momentum, suggesting that the path of least resistance for Gold may be to the downside. Any upward movement is likely to encounter immediate resistance around the recent swing high near $2,626. However, if there is follow-through buying, it could spark a short-covering rally, pushing the XAU/USD toward the next resistance zone around $2,652-$2,655. A sustained move above this level could negate the bearish outlook and open the door for further gains.

On the downside, the monthly low of $2,583, reached on Thursday, should provide initial support. A break below this level could send Gold toward the $2,560 area, followed by a test of the $2,537-$2,536 zone or the November swing low. A continued downtrend might push Gold further toward the psychological $2,500 level, with the next significant support at the 200-day SMA, currently around $2,472.