|

Gold trades with a positive bias as dovish Fed outlook offsets firmer US Dollar

  • Gold trades with a positive bias but struggles to extend gains as the US Dollar rebounds.
  • Fed easing expectations for 2026 remain in focus after softer US labour market signals
  • On the technical front, XAU/USD remains in a bullish structure but is consolidating below the 4,350 resistance zone.

Gold (XAU/USD) rebounds on Wednesday after early losses, though a firmer US Dollar (USD) continues to cap upside momentum. At the time of writing, XAU/USD is trading around $4,335, up nearly 0.70% on the day.

Youtube preview

Despite the range-bound price action seen so far this week, the broader bias for the yellow metal remains constructive, as a dovish Federal Reserve outlook and persistent geopolitical risks help limit downside attempts.

Market expectations continue to tilt toward further monetary easing by the Federal Reserve (Fed) in 2026 after Tuesday’s delayed US jobs data reinforced concerns about a cooling labour market, with attention now turning to Thursday’s Consumer Price Index (CPI) report.

The US economic calendar is relatively light on Wednesday, investors will parse comments from key FOMC members for additional clues on the Fed’s monetary policy path next year.

Market movers: US jobs data reinforce Fed easing expectations; geopolitical risks resurface

  • The US Dollar Index (DXY), which tracks the Greenback against a basket of six major currencies, is trading around 98.50, extending its rebound after briefly slipping below 98.00 on Tuesday, its lowest level since October 3.
  • Data from the US Bureau of Labor Statistics (BLS) showed that the US economy added 64,000 jobs in November, slightly above market expectations for a 50,000 increase, after payrolls fell by 105,000 in October due to the government shutdown. Meanwhile, the Unemployment Rate rose to 4.6%, above expectations of 4.4%, marking its highest level since September 2021.
  • The report also showed that US payrolls were revised down by a combined 33,000 over August and September, echoing remarks from Fed Chair Jerome Powell, who warned at last week’s post-meeting press conference that job gains since April may have been overstated by around 60,000.
  • Overall, the employment data suggest that the US labour market continues to cool. While November’s payroll gain came in slightly better than expected, the broader picture remains soft, with slower job creation, rising unemployment and easing wage growth. The data reinforce expectations that the Fed has room to ease policy, with markets currently pricing in two rate cuts next year.
  • Geopolitical tensions are back in focus after earlier optimism around progress in US-led Russia-Ukraine peace talks was overshadowed by fresh developments, with reports that US President Donald Trump ordered a blockade of sanctioned Oil tankers entering and leaving Venezuela.

Technical analysis: XAU/USD consolidates below 4,350 resistance

From a technical perspective, XAU/USD remains constructive after breaking above the $4,250 level, though near-term upside appears capped around $4,350, leaving prices vulnerable to a period of consolidation.

On the 4-hour chart, XAU/USD continues to trade within an ascending structure, supported by a rising trendline drawn from the mid-November lows near $4,000.

The 21-period Simple Moving Average (SMA), around $4,310, offers immediate dynamic support, followed by a stronger support zone near $4,250, where the 50-period SMA converges.

On the upside, a decisive break above the $4,350 region would be needed to clear near-term resistance and open the door for a retest of record highs and potentially further gains.

The Relative Strength Index (RSI) is holding near 58, remaining in neutral-to-bullish territory above its midline. Meanwhile, the Average Directional Index (ADX) at around 29.75 suggests the broader trend remains intact, though some cooling in momentum implies consolidation could precede the next directional move.

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

Vishal Chaturvedi

I am a macro-focused research analyst with over four years of experience covering forex and commodities market. I enjoy breaking down complex economic trends and turning them into clear, actionable insights that help traders stay ahead of the curve.

More from Vishal Chaturvedi
Share:

Editor's Picks

EUR/USD holds losses below 1.1850 ahead of FOMC Minutes

EUR/USD stays on the back foot below 1.1850 in the European session on Wednesday, pressured by renewed US Dollar demand and reports that ECB President Lagarde will step down before the end of her term. Traders now look forward to the Minutes of the Fed's January monetary policy meeting for fresh signals on future rate cuts. 

GBP/USD defends 1.3550 after UK inflation data

GBP/USD is holding above 1.3550 in Wednesday's European morning, little changed following the UK Consumer Price Index (CPI) data release. The UK inflation eased as expected in January, reaffirming bets for a March BoE interest rate cut, especially after Tuesday's weak employment report. 

Gold retains bullish bias amid Fed rate cut bets, ahead of Fed Minutes

Gold sticks to modest intraday gains through the early European session, reversing a major part of the previous day's heavy losses of more than 2%, to the $4,843-4,842 region or a nearly two-week low. That said, the fundamental backdrop warrants caution for bulls ahead of the FOMC Minutes, which will look for more cues about the US Federal Reserve's rate-cut path. 

Pi Network rally defies market pressure ahead of its first anniversary

Pi Network is trading above $0.1900 at press time on Wednesday, extending the weekly gains by nearly 8% so far. The steady recovery is supported by a short-term pause in mainnet migration, which reduces pressure on the PI token supply for Centralized Exchanges. The technical outlook focuses on the $0.1919 resistance as bullish momentum increases.

Mixed UK inflation data no gamechanger for the Bank of England

Food inflation plunged in January, but service sector price pressure is proving stickier. We continue to expect Bank of England rate cuts in March and June. The latest UK inflation read is a mixed bag for the Bank of England, but we doubt it drastically changes the odds of a March rate cut.

Top 3 Price Prediction: Bitcoin, Ethereum, and Ripple face downside risk as bears regain control

Bitcoin, Ethereum, and Ripple remain under pressure on Wednesday, with the broader trend still sideways. BTC is edging below $68,000, nearing the lower consolidating boundary, while ETH and XRP also declined slightly, approaching their key supports.