- Gold prices inch higher on Tuesday but struggle to gain strong momentum.
- Geopolitical tensions and trade war concerns provide support for the safe-haven XAU/USD.
- The Federal Reserve’s hawkish stance boosts the USD, limiting gains for the precious metal.
Gold prices (XAU/USD) struggle to build on modest intraday gains on Tuesday, remaining below the multi-day high reached on Monday amid mixed market signals. Geopolitical risks from the ongoing Russia-Ukraine conflict, heightened tensions in the Middle East, and trade war concerns provide some support for the safe-haven metal. However, the Federal Reserve’s hawkish stance acts as a headwind, limiting further upside.
Last week, the Fed indicated a slower pace of interest rate cuts in 2025, bolstering US Treasury yields and keeping the US Dollar (USD) near a two-year high. This strength in the USD continues to weigh on the non-yielding Gold price. Amid subdued trading volumes, it remains prudent to wait for sustained buying interest before expecting a continuation of the recovery from last week’s one-month low.
Gold Price Bulls Remain Cautious Amid Fed’s Hawkish Stance
- The Federal Reserve last week softened its outlook for rate cuts in 2025, signaling a shift in monetary policy and adding uncertainty regarding potential changes under the upcoming Trump administration.
- On Monday, the yield on the benchmark 10-year US Treasury surged to its highest level since May, while the US Dollar held firm near a two-year peak reached last week. These factors are likely to limit upside potential for the non-yielding Gold price.
- On the geopolitical front, the Israel Defense Forces (IDF) reported sirens in central and southern Israel on Tuesday and intercepted a projectile launched from Yemen, as Israeli forces continued their offensive in northern Gaza.
- In Ukraine, Russian forces captured two villages and made steady gains in the Donetsk region. Meanwhile, US President-elect Donald Trump called on Ukrainian President Volodymyr Zelenskyy to consider a ceasefire and relinquish control of Russian-occupied territories.
- Traders are now awaiting the release of the Richmond Manufacturing Index, which, alongside US bond yields, will impact the USD and could drive price action amid thin liquidity ahead of Christmas Eve.
Gold Price Appears Vulnerable as Bearish Flag Pattern Emerges
From a technical standpoint, Gold’s recent recovery from a one-month low, forming an ascending channel, indicates a potential bearish flag pattern on the hourly charts. Additionally, daily chart oscillators remain in negative territory, reinforcing a bearish outlook. However, a decisive break below the channel’s support, currently near the $2,605-$2,600 range, is required to confirm further downside potential.
A breakdown below this level could pull Gold prices back towards last week’s monthly low of $2,583. Continued selling pressure could trigger additional bearish momentum, setting the stage for a decline toward November’s swing low in the $2,537-$2,536 range, with the $2,500 psychological level as the next target.
On the upside, the $2,633-$2,634 zone—Monday’s multi-day high and the upper boundary of the ascending channel—remains a strong resistance level. A sustained move above this barrier could lead to short-covering, lifting Gold towards the $2,654-$2,655 zone. This area serves as a critical pivot, and a decisive break above it would negate the bearish bias, opening the door for further gains towards the $2,700 mark.
