Gold News: XAU/USD Tests 50-Day Moving Average – Breakout or Pullback Ahead?

Gold Prices Edge Lower as Traders Eye Key Technical Levels

Gold prices dipped slightly on Friday, testing the 50-day moving average at $2658.24. The market’s response to this key level is likely to shape near-term direction. A decisive move above the 50-day average would signal buying interest, potentially driving prices toward the 50% retracement level at $2663.51. This could pave the way for a push towards the Fibonacci resistance at $2693.40. Conversely, failure to break higher could trigger renewed selling pressure, targeting support around $2629.13 to $2607.35.

At 10:55 GMT, XAU/USD is trading $2656.42, down $1.81 or -0.07%.

Gold Gains Support from Softer Dollar and Safe-Haven Demand

Earlier in the session, gold hit a three-week peak, buoyed by a weaker U.S. dollar and increased safe-haven inflows. Spot gold rose approximately 1.3% for the week as the dollar index (DXY) slipped 0.4%, making gold more attractive to foreign investors. Geopolitical tensions also fueled demand, with Israeli airstrikes in Gaza and Russian drone attacks on Kyiv contributing to uncertainty.

Analysts noted that concerns over inflationary pressures linked to U.S. President-elect Donald Trump’s anticipated policies are also boosting gold’s appeal. “Markets are pricing in the possibility of higher inflation as Trump’s policies could trigger trade wars and import tariffs,” said Han Tan, Chief Market Analyst at Exinity Group. Gold’s reputation as a hedge against inflation and geopolitical risks continues to underpin prices.

Fed Policy and Treasury Yields Influence Gold Outlook

The Federal Reserve’s monetary policy remains a significant factor for gold traders. Following three rate cuts in 2024, the Fed has signaled only two reductions for 2025, limiting downside pressure on the dollar. Treasury yields reflect this sentiment, with the 10-year note ending 2024 at 4.5% after fluctuating throughout the year. Lower yields typically support gold by reducing the opportunity cost of holding the non-yielding asset.

Investors are closely watching economic data, including the ISM manufacturing PMI, due later on Friday. A reading above 50% signals growth, potentially dampening gold’s momentum. Conversely, weaker data may reinforce the case for further rate cuts, supporting bullion.

Dollar Strength Caps Gold’s Upside Potential

Despite recent softness, the dollar is on track for its best week since November, driven by expectations of fewer rate cuts and continued U.S. economic resilience. The dollar index surged to a two-year high, reinforcing its safe-haven appeal amid global economic uncertainty. This strength presents a headwind for gold, limiting upside moves.

Analysts suggest that while gold may continue to benefit from geopolitical risks, persistent dollar strength and high U.S. yields could restrain further gains. “Dollar exceptionalism remains a dominant theme, weighing on gold’s long-term breakout potential,” said Charu Chanana, Chief Strategist at Saxo.

Gold Market Forecast

Gold’s near-term outlook hinges on its ability to sustain above the 50-day moving average. A break higher could spur momentum towards $2693.40, while failure to clear resistance may drive prices back toward the $2607.35 support zone. The dollar’s performance and evolving Fed policy will play a critical role in shaping price action. Traders should remain cautious, as geopolitical developments and inflation trends are likely to influence sentiment in the weeks ahead.

More Information in our Economic Calendar.