Gold price stays bullish amid trade war fears and falling yields
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Gold (XAU/USD) extended its gains for the second consecutive day on Wednesday, building on its recovery from the $2,600 level. The yellow metal’s rally is underpinned by geopolitical tensions, trade war concerns, and declining US Treasury bond yields, which keep the US Dollar (USD) near weekly lows. However, the market remains cautious ahead of the release of key US economic data, including the Q3 GDP revision and the Personal Consumption Expenditure (PCE) Price Index, which are likely to influence near-term price action.
Drivers of Gold’s Rally
The announcement of tariffs by US President-elect Donald Trump on imports from Canada, Mexico, and China has fueled safe-haven demand, pushing gold prices higher. Additionally, ongoing geopolitical risks—such as the escalation in the Russia-Ukraine conflict—have further bolstered the metal’s appeal.
A decline in US Treasury yields, coupled with a softer USD, has created favorable conditions for the non-yielding gold. Market expectations of a phased tariff approach by Trump’s nominee for Treasury Secretary, Scott Bessent, have provided additional support.
Despite these bullish factors, the Federal Reserve’s cautious stance on future rate cuts, as indicated in the minutes of the November FOMC meeting, could limit gold’s upside.
Technical Analysis: Key Levels to Watch
Gold’s rebound from the 61.8% Fibonacci retracement level of its recent recovery reinforces a bullish bias. However, technical indicators on the daily chart have yet to confirm sustained upward momentum, signaling potential resistance ahead:
Immediate resistance: The 100-period Simple Moving Average (SMA) on the 4-hour chart at $2,645. A break above this level could open the door for further gains toward $2,665, followed by the $2,677-$2,678 zone, and potentially the $2,700 psychological level.
Support levels: The $2,624-$2,622 region serves as initial support, with stronger backing at $2,600. A break below $2,600 would expose the 100-day SMA near $2,569-$2,568, with further downside risks toward the monthly low at $2,537-$2,536.
Failure to hold these support levels would suggest a resumption of the broader corrective decline from October’s all-time high of $2,800.
Market Outlook
While gold’s current rally is supported by geopolitical and economic uncertainties, its trajectory will depend on forthcoming US economic data. The Q3 GDP revision and PCE Price Index later today will provide crucial insights into the Fed’s rate outlook, influencing USD dynamics and gold’s near-term direction.
For traders, acceptance above $2,645 will confirm additional bullish momentum, with potential targets at $2,665 and $2,700. Conversely, a failure to defend $2,600 could signal renewed bearish pressure, setting the stage for a deeper correction.
As market participants navigate these levels, broader developments—such as geopolitical risks and Fed commentary—will continue to shape gold’s outlook in the coming sessions.
Drivers of Gold’s Rally
The announcement of tariffs by US President-elect Donald Trump on imports from Canada, Mexico, and China has fueled safe-haven demand, pushing gold prices higher. Additionally, ongoing geopolitical risks—such as the escalation in the Russia-Ukraine conflict—have further bolstered the metal’s appeal.
A decline in US Treasury yields, coupled with a softer USD, has created favorable conditions for the non-yielding gold. Market expectations of a phased tariff approach by Trump’s nominee for Treasury Secretary, Scott Bessent, have provided additional support.
Despite these bullish factors, the Federal Reserve’s cautious stance on future rate cuts, as indicated in the minutes of the November FOMC meeting, could limit gold’s upside.
Technical Analysis: Key Levels to Watch
Gold’s rebound from the 61.8% Fibonacci retracement level of its recent recovery reinforces a bullish bias. However, technical indicators on the daily chart have yet to confirm sustained upward momentum, signaling potential resistance ahead:
Immediate resistance: The 100-period Simple Moving Average (SMA) on the 4-hour chart at $2,645. A break above this level could open the door for further gains toward $2,665, followed by the $2,677-$2,678 zone, and potentially the $2,700 psychological level.
Support levels: The $2,624-$2,622 region serves as initial support, with stronger backing at $2,600. A break below $2,600 would expose the 100-day SMA near $2,569-$2,568, with further downside risks toward the monthly low at $2,537-$2,536.
Failure to hold these support levels would suggest a resumption of the broader corrective decline from October’s all-time high of $2,800.
Market Outlook
While gold’s current rally is supported by geopolitical and economic uncertainties, its trajectory will depend on forthcoming US economic data. The Q3 GDP revision and PCE Price Index later today will provide crucial insights into the Fed’s rate outlook, influencing USD dynamics and gold’s near-term direction.
For traders, acceptance above $2,645 will confirm additional bullish momentum, with potential targets at $2,665 and $2,700. Conversely, a failure to defend $2,600 could signal renewed bearish pressure, setting the stage for a deeper correction.
As market participants navigate these levels, broader developments—such as geopolitical risks and Fed commentary—will continue to shape gold’s outlook in the coming sessions.