Gold Forecast: Bulls await breakout through multi-day-old range amid Fed rate cut bets

Gold (XAU/USD) attracts fresh buyers during the Asian session on Wednesday, though it remains confined in a multi-day-old trading range amid mixed fundamental cues. The global risk sentiment remains on the defensive amid economic woes and fears of the AI bubble burst. Moreover, dovish US Federal Reserve (Fed) expectations lend support to the non-yielding yellow metal, though a modest US Dollar (USD) uptick might cap any further appreciating move.

Official data released on Monday showed China’s industrial output rose 4.8% YoY in November, marking the weakest pace since August 2024. Adding to this, Retail Sales grew 1.3%, or the weakest pace since December 2022. This revived concerns about the health of the world's second-largest economy. Furthermore, Tuesday's mixed US Nonfarm Payrolls (NFP) report pointed to signs of softening labor market conditions and tempers investors' appetite for riskier assets.

The US Bureau of Labor Statistics (BLS) reported that the economy added 64K jobs in November, beating market expectations for a 50K increase. This, however, was offset by October's dismal figures, which showed that payrolls declined by 105K on the back of the US government shutdown. Adding to this, the Unemployment Rate increased to 4.6% last month, or the highest level since September 2021. Moreover, wages also showed signs of easing and rose 0.1% in November.

Separately, US Retail Sales were unexpectedly flat in October following a downwardly revised 0.1% rise in the previous month. The reading fell short of estimates and reaffirmed bets for more interest rate cuts by the US central bank. Meanwhile, reports suggest that US President Donald Trump is set to interview Christopher Waller for the Fed Chair position. Investors seem convinced that the new Trump-aligned Fed chair will be dovish and slash interest rates further.

The USD, however, attracts some buyers and builds on the overnight bounce from the lowest level since early October, which, in turn, might hold back the XAU/USD bulls from placing aggressive bets. Hence, it will be prudent to wait for a sustained break through a multi-day-old trading range before positioning for the XAU/USD pair's next leg of a directional move. The market attention now shifts to the release of the latest US consumer inflation figures, due on Thursday.

In the meantime, speeches from influential FOMC members will be looked upon for cues about the Fed's rate-cut path. The focus, however, will remain glued to the latest US consumer inflation figures, which will play a key role in influencing the USD price dynamics and providing meaningful impetus to the Gold price. Nevertheless, the aforementioned fundamental backdrop favors bulls and suggests that the path of least resistance for the bullion remains to the upside.

XAU/USD 1-hour chart

Technical Analysis

The XAU/USD pair holds well above the rising 200-period Exponential Moving Average (EMA) at $4,258 area, with the slope pointing higher and underpinning the intraday uptrend. The Moving Average Convergence Divergence (MACD) shows the line above the Signal line in positive territory, while a mild contraction in the histogram suggests momentum has cooled after the latest advance. The RSI stands near 60, supportive of a bullish tone without overbought readings.

Staying above the day opening, around the $4,300 mark, would keep the path geared toward further gains, while pullbacks could be cushioned by the 200-EMA. A fresh widening of the MACD histogram would strengthen bullish momentum and could unlock an extension higher. RSI around 60 leaves room for continuation, though a drop back below the intraday pivot would encourage a consolidative phase.

(The technical analysis of this story was written with the help of an AI tool)