Gold Price Forecast: XAU/USD pierces $2,600 amid mounting risk aversion

XAU/USD Current price: $2,599.81

• Thin holiday conditions exacerbate market movements ahead of New Year’s Eve.
• Uncertainty about what the new year will bring sends investors into safety.
• XAU/USD accelerated its slide after Wall Street’s opening and aims to test the monthly low.

Spot Gold pierced the $2,600 mark in the American session, further retreating from Friday’s peak at $2,638. Sentiment leads the way, with the US Dollar (USD) gaining momentum after Wall Street’s opening amid the poor performance of local indexes. Thin trading conditions exacerbate stocks’ decline, spurring USD near-term demand. Nevertheless, and despite near-term losses, the three major indexes are heading to close another year with solid gains.

Additionally, market players drop high-yielding assets amid uncertainty over what 2025 may bring. The United States (US) Federal Reserve (Fed) has recently announced it will slow the pace of interest rate cuts amid stubbornly high inflation. Also, former president Donald Trump will return to the White House on January 20 and his anticipated protectionism measures may mean even higher inflationary pressures ahead.

XAU/USD short-term technical outlook

From a technical point of view, the daily chart for XAU/USD shows the pair has met intraday sellers around a bullish 100 Simple Moving Average (SMA), while the 20 SMA turns south above the longer one. Technical indicators, in the meantime, gain bearish traction within negative levels, favoring a downward extension towards the December low at $2,582.93.

In the near term, and according to the 4-hour chart, the bearish case is also solid. XAU/USD is currently developing below all its moving averages, with the 20 SMA gaining downward strength below the longer ones. At the same time, technical indicators head lower almost vertically, currently approaching oversold readings.

Support levels:  2,595.80 2,582.90  2,570.10

Resistance levels: 2,604.20 2,617.55 2,632.00