Gold Price Forecast: Focus on daily close as XAU/USD braces for key US data
- Gold sits at six-week highs above $4,250 early Monday, looks to the US ISM PMI.
- US Dollar sees a negative start to December amid growing bets for a rate cut next week.
- Gold eyes a daily closing above the key $4,250 hurdle to extend the uptrend.
Gold is firming up near $4,250 early Monday, its highest level in six weeks. Gold buyers retain control at the start of a new month amid growing calls for another interest rate cut by the US Federal Reserve (Fed) as early as next week.
Gold capitalizes on broad US Dollar weakness
Markets are now pricing in an 87% chance the Fed will cut by 25 basis points (bps) at its December monetary policy meeting, according to the CME FedWatch tool.
With a December Fed rate cut almost a done deal, the US Dollar (USD) keeps its bearish undertone intact, after having registered its worst week in four months, favoring the Gold price upside.
Concerns over the Fed’s leadership also remain a drag on the USD, as Gold optimists aim for the $4,300 threshold.
Last week, Reuters reported that White House Economic Adviser Kevin Hassett emerged as the frontrunner to be the next Fed chair.
Meanwhile, US Treasury Secretary Scott Bessent said there was a good chance President Donald Trump would announce his pick before Christmas.
In the day ahead, all eyes will be on the US ISM Manufacturing PMI for November, which could provide fresh hints on the health of the economy, following a spate of dated economic releases. The headline Manufacturing PMI is set to edge lower to 48.6 last month after October’s 48.7.
Deepening contraction in the American manufacturing sector will likely cement a December Fed rate cut, exacerbating the Greenback’s pain, while providing a fresh leg higher in the bright metal.
Later this week, a host of US statistics, including the ADP Employment Change, ISM Services PMI, Unemployment Claims and the Core Personal Consumption Expenditures (PCE) Price Index, will fill in the recent data void and offer fresh directives on trading the USD and Gold heading into the Fed showdown next week.
Gold price technical analysis: Daily chart
In the daily chart, the 21-, 50-, 100- and 200-day Simple Moving Averages (SMA) all rise in bullish alignment with price above them, while the 21-day SMA at $4,095.07 offers nearby dynamic support. The Relative Strength Index (RSI) prints at 65.97, reflecting firm upside momentum without venturing into overbought territory. Measured from the $4,381.17 high to the $3,885.84 low, the 78.6% retracement at $4,275.16 caps the immediate advance. A decisive close above it could extend the run.
Bias stays positive as the metal holds above its rising averages, with the 50-day SMA at $4,040.77 underpinning the trend. Holding above the 61.8% retracement at $4,191.95 indicates the prior bearish phase is losing strength. A failure to maintain that level would risk a deeper pullback, while a break higher would keep bulls in control toward the recent high.
(The technical analysis of this story was written with the help of an AI tool)
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
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Author
Dhwani Mehta
FXStreet
Residing in Mumbai (India), Dhwani is a Senior Analyst and Manager of the Asian session at FXStreet. She has over 10 years of experience in analyzing and covering the global financial markets, with specialization in Forex and commodities markets.
