Gold Inches Higher Amid Fed Rate Cut Uncertainty: Will Momentum Sustain?

Gold prices edged higher on Thursday, continuing their bullish trend from 2024, as traders await critical U.S. economic data for clarity on Federal Reserve policies and President-elect Donald Trump’s economic plans.

This uptick in the yellow metal comes amidst a softening U.S. dollar, which made gold more appealing to international buyers.

Fed Policy and Inflation Keep Traders on Edge

Investors remain fixated on the Federal Reserve’s interest rate strategy for 2025, especially after its December meeting signaled caution. According to Anuj Gupta, Head of Commodity & Currency at HDFC Securities, “Gold prices are benefiting from profit-taking in the U.S. dollar. However, the Fed’s reluctance to cut rates stems from inflation consistently hovering above 2%.”

The CME FedWatch Tool reflects this sentiment, showing just an 11.2% probability of a January rate cut. Traders now look to upcoming U.S. economic reports, including jobs data and inflation figures, for signals about the Fed’s next steps.

Despite these uncertainties, analysts note that gold continues to benefit from safe-haven demand amid broader economic and geopolitical volatility.

Technical Outlook: Key Levels to Watch

Gold Spot (XAU/USD) is trading at $2,634.33, marking a modest 0.05% rise in the last session. Technical indicators suggest a bullish trajectory, but key resistance levels must be breached for sustained momentum.

• Resistance Levels: Immediate resistance lies at $2,652.16, followed by $2,670.51 and $2,690.15.

• Support Levels: On the downside, support is found at $2,623.91, with deeper safety nets at $2,602.90 and $2,580.36.

• Indicators: The Relative Strength Index (RSI) at 61.54 highlights bullish sentiment nearing overbought levels. Gold is trading above its 50-day EMA at $2,628.66, reinforcing short-term optimism.

The ascending trendline from $2,555.58 strengthens the case for a broader bullish outlook. However, a decisive move above $2,652.16 is essential to pave the way toward higher resistance at $2,690.15.

Broader Market Dynamics

Gold’s rally is underpinned by a weakening dollar and profit-taking in the forex market, making the metal more affordable globally. Analysts also point to the ongoing uncertainty surrounding U.S. fiscal policies under the Trump administration, which may further bolster gold’s safe-haven appeal.

While the Fed’s hesitation to cut rates may limit near-term gains, gold’s trajectory appears poised for growth in the first quarter of 2025, provided macroeconomic conditions remain supportive.

ABOUT THE AUTHOR See More

Arslan Ali Butt

Lead Markets Analyst – Multi-Asset (FX, Commodities, Crypto)

Arslan Ali Butt serves as the Lead Commodities and Indices Analyst, bringing a wealth of expertise to the field. With an MBA in Behavioral Finance and active progress towards a Ph.D., Arslan possesses a deep understanding of market dynamics. His professional journey includes a significant role as a senior analyst at a leading brokerage firm, complementing his extensive experience as a market analyst and day trader. Adept in educating others, Arslan has a commendable track record as an instructor and public speaker. His incisive analyses, particularly within the realms of cryptocurrency and forex markets, are showcased across esteemed financial publications such as ForexCrunch, InsideBitcoins, and EconomyWatch, solidifying his reputation in the financial community.