Gold prices (XAU/USD) recovered slightly in the Asian session on Wednesday, rising to around $2,610 after hitting a three-week low of $2,590 the previous day.
While no immediate catalyst emerged for this uptick, analysts suggest traders might be adjusting their positions ahead of upcoming U.S. inflation data.
The U.S. dollar, meanwhile, maintained its strength, holding near its highest levels since May—a factor that often weighs on gold prices due to their inverse relationship.
The U.S. dollar has been buoyed by expectations surrounding President-elect Donald Trump’s proposed expansionary policies. His stance on protectionist tariffs has fueled expectations of rising inflation, a scenario that complicates the Federal Reserve’s rate policy decisions.
Currently, inflation is expected to climb, with the October Consumer Price Index (CPI) projected to show a 0.2% monthly rise and a 2.6% year-over-year increase, up from 2.4% in the prior month.
These inflationary pressures could prevent the Fed from continuing rate cuts, which keeps bond yields elevated and diminishes gold’s appeal as a safe-haven asset.
U.S. Federal Reserve officials remain cautious regarding inflation. Richmond Fed President Tom Barkin noted that while inflation appears under control, it may stay above the Fed’s 2% target.
Minneapolis Fed President Neel Kashkari added that any unexpected inflation surge could lead the Fed to reconsider its rate policy during the December meeting.
As a result of these inflation concerns, the 10-year U.S. government bond yield remains near multi-month highs, reflecting diminished expectations for aggressive Fed rate cuts. Higher bond yields reduce gold’s attractiveness, as the metal offers no yield.
For now, market participants await the CPI release, which may determine the near-term trajectory for gold and the dollar.
Gold’s short-term forecast hinges on breaking the $2,612.80 pivot. A rise above this could drive bullish momentum, while failure to breach may lead to further declines toward support levels around $2,592.
Gold prices are trading at $2,605.90, marking a 0.29% uptick in the 4-hour session. Currently, gold sits below a key pivot at $2,612.80, with a double-top resistance pattern capping gains.
This level, alongside the 50-day EMA at $2,622.08, signals a potential resistance zone, with further hurdles at $2,626.76 and $2,643.19 if the price pushes higher. On the downside, support lies at $2,592.77, with additional cushions at $2,578.68 and $2,564.59.
Should gold break above $2,612.80, it could reignite bullish momentum; however, if it fails, sellers may drive prices lower, likely targeting immediate support levels.
Arslan, a webinar speaker and derivatives analyst, has an MBA in Finance and MPhil in Behavioral Finance. He guides financial analysis, trading, and cryptocurrency forecasting. Expert in trading psychology and sentiment.