Gold holds steady as traders weigh Fed stance and upcoming data
- XAU/USD trades around $4,296 as traders lock in profits despite continued softness in the US Dollar.
- Fed officials deliver mixed signals as Williams leans hawkish, while Miran argues for faster cuts toward neutral.
- Markets still price further easing into 2026 as investors await NFPs, inflation data, and PMI releases this week.
Gold (XAU/USD) holds firm on Monday after hitting a daily high of $4,350 earlier, but traders booking profits sent the yellow metal to erase its earlier gains as the Greenback continues to print losses. XAU/USD trades at $4,296 virtually unchanged.
Bullion holds firm after touching $4,350, with Fed rhetoric mixed and markets weighing easing pause
The US economic docket remains light, but Federal Reserve (Fed) officials are taking the stand. The Boston Fed's Susan Collins sounded slightly neutral, while the New York Fed's John Williams was hawkish, saying that policy has moved “toward neutral from modestly restrictive.”
Fed Governor Stephen Miran remained uber dovish as he said that a faster pace of rate cuts would move the US central bank closer to neutral.
Last week, the Fed’s reduced rates for a third time in 2025 to 3.50%-3.75% on a split decision. At the same time, Fed Chair Jerome Powell hinted that they could pause the easing cycle as the economy digests the 75 basis points of recent rate cuts.
Despite this, money markets are pricing in 50 bps of easing toward the end of 2026.
Ahead this week the US economic docket will feature Nonfarm Payrolls, Retail Sales, and S&P Flash PMIs readings for December on Tuesday. On Wednesday, the focus would be on Fed policymakers, followed by the release of Initial Jobless Claims and inflation figures on Thursday and the University of Michigan (UoM) Consumer Sentiment survey on Friday.
Daily digest market movers: Gold rises despite Fed hawkish comments
- Boston Fed President Susan Collis commented that she sees future inflation risks lower than before and supported a cut due to the shift of balance risks.
- New York Fed President John Williams mentioned that it is critical to get inflation back to 2%, and that he sees reluctancy to hire and fire in the job market. He expects the Unemployment Rate to remain at 4.5% by year’s end and inflation hitting the 2% goal in 2027.
- Regarding Gross Domestic Product (GDP), Williams expects the economy will end at 2.25% in 2026, above the 2025 rate.
- Fed Governor Stephen Miran reaffirmed its dovish stance, saying that he “expects a faster fall in PCE shelter inflation,” argued that tariffs are not driving goods inflation higher.
- US Nonfarm Payrolls in November are expected at 40K, with the Unemployment Rate standing steady at 4.4%.
- Retail Sales in October are foreseen to increase 0.2% MoM, unchanged from September’s 0.2%. Sales for the control group, which is used to calculate GDP figures, are projected to improve from a -0.1% contraction to 0.3% for the same period.
- US Treasury yields are rising despite the 10-year benchmark note rate unchanged at 4.19%. US real yields, which correlate inversely with Gold prices, are also firm at 1.926%.
- The US Dollar Index (DXY), which tracks the Greenback's performance against a basket of six peers, is flat at 98.35.
Technical Analysis: Gold’s uptrend intact as bulls take a breather
Gold is upwardly biased, even though it hovers above and beyond the $4, 300 mark, with bulls remaining in charge as depicted by the Relative Strength Index (RSI). The RSI is bullish and as it enters overbought territory, hinting that buying pressure is strong.
If XAU/USD climbs above the current’s day high of $4,353, this opens the door to test the all-time high (ATH) at $4,381. Once surpassed the next stops would be $4,400, $4,450 and $4,500. Conversely, if Gold prices tumble below the December 11 high of $4,285, look for further downside to $4,250 ahead of $4,200.
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.
Author
Christian Borjon Valencia
FXStreet
Christian Borjon began his career as a retail trader in 2010, mainly focused on technical analysis and strategies around it. He started as a swing trader, as he used to work in another industry unrelated to the financial markets.
