Gold prices rose as the U.S. November PCE price index increased by 2.4%, below the expected 2.5%, providing some support. However, gold remains constrained by resistance between $2607.35 and $2629.13, with the 50-day moving average at $2669.00 posing further challenges. This week, gold prices have fallen approximately 1.8% due to the Federal Reserve's firm stance on interest rates.
The Fed's outlook, predicting only two rate cuts of 25 basis points each by 2025, has dampened bullish sentiment for gold. Higher interest rates increase the opportunity cost of holding non-yielding assets like gold. Fed Chair Powell emphasized caution in policy easing, supported by stronger-than-expected U.S. economic growth and lower jobless claims.
Rising U.S. Treasury yields and a stronger dollar have increased pressure on gold. Robust economic data and Fed guidance have driven yields higher, attracting investors to interest-bearing assets. A stronger dollar has reduced gold's appeal as a hedge, particularly for foreign buyers facing higher exchange rate costs.
Technically, gold faces significant downside risks, with key support at $2536.85. A break below this level could lead to a decline towards the 200-day moving average of $2472.31. Traders should watch these levels closely.
Gold is expected to trade with a bearish trend in the short term, with strong resistance at $2629 and $2669. The potential for testing $2536.85 increases if the Fed maintains its hawkish stance. U.S. Treasury yields and a strong dollar remain key factors impacting gold's recovery potential.
