Gold (XAU) Price Forecast: Strong Dollar and Rising Yields Cap Upside Ahead of Fed

Stuck Between Key Technical Levels Ahead of Critical Fed Decision

Gold prices are trading within a tight range on Wednesday, as investors remain cautious ahead of the Federal Reserve’s rate decision. Prices are currently hovering between support at $2629.13 to $2607.35 and resistance at $2663.51 to $2693.40. A breakout above $2693.40 would signal a bullish move, while a drop below $2607.35 could trigger bearish momentum.

Adding to the pressure, gold remains below the 50-day moving average at $2671.95. A decisive move above this level will be key for any bullish recovery.

Fed Guidance on 2025 Rate Cuts in Focus

Traders are bracing for the Federal Reserve’s policy update later today, with the central bank widely expected to hold rates steady. Markets have priced in a 95.4% chance of no change, but the real focus will be on the dot plot and economic outlook for 2025. Analysts anticipate a more hawkish tone, signaling two or three rate cuts next year instead of four.

This cautious outlook follows stronger-than-expected U.S. retail sales, which rose 0.7% in November. Resilient economic data has reinforced the case for a slower pace of rate easing, which could weigh on gold prices moving forward.

Bond Yields and Strong Dollar Pressure Gold

Rising U.S. Treasury yields are adding to gold’s struggles. The 10-year Treasury yield has climbed to 4.40%, while the 2-year yield sits at 4.25%, reflecting market expectations of limited rate cuts in 2025. Higher yields typically increase the opportunity cost of holding gold, reducing its appeal.

Meanwhile, the U.S. dollar index (DXY) remains firm, trading around 106.98 after touching a recent high of 107.18. A stronger dollar makes gold more expensive for foreign investors, keeping gains in check.

Short-Term Outlook: Bearish Risks Ahead

Gold’s immediate outlook remains bearish unless prices can reclaim the 50-day moving average and break above key resistance at $2693.40. A hawkish tone from the Fed could push prices toward the lower support zone near $2607.35. However, any dovish surprises may reignite buying interest, with the potential to test resistance levels.

For now, gold traders remain on edge as the market awaits clearer signals from the Fed on its path for 2025.

More Information in our Economic Calendar.