Gold Prices Rebound to $2,625 Amid Rate Cut Speculation and Inflation Slowdown

Gold prices edged higher on Monday, reaching $2,625, as short covering provided relief after a sharp decline last week.

The Federal Reserve’s cautious tone following its 25-basis-point rate cut on Dec. 18 weighed on bullion earlier, pushing prices to their lowest since Nov. 18. Fed projections suggest fewer rate cuts in 2025, tempering market optimism.

Ajay Kedia, director at Kedia Commodities, commented, “The short covering started on Friday, supported by technical levels.” Friday’s rebound was fueled by a weaker U.S. dollar and softer Treasury yields after economic data pointed to easing inflationary pressures.

The Personal Consumption Expenditures (PCE) Index, a key inflation gauge, rose 0.1% in November, slowing from 0.2% in October. Fed policymakers, including San Francisco Fed President Mary Daly, indicated that while rate cuts are expected in 2025, the central bank will adopt a measured approach.

XAU/USD

Technical Levels Indicate Resistance at $2,639

Gold remains in a consolidation phase after recovering from support at $2,602. Key technical levels suggest immediate resistance at $2,639, coinciding with the 50-day EMA, followed by $2,663 and $2,692.

The RSI, currently at 51.21, reflects neutral momentum with a slight bullish tilt. However, without a breakout above $2,639, bearish pressure may persist. On the downside, support levels are noted at $2,602, $2,580, and $2,560. The ascending trendline near $2,602 continues to provide critical support, drawing short-term buyers into the market.

Gold Prices Rebound to $2,625 Amid Rate Cut Speculation and Inflation Slowdown

Ajay Kedia added, “Gold’s good support lies at $2,595, with resistance at $2,664. A sustained move above these levels could reshape sentiment.”

Global Drivers Add Complexity to Gold’s Outlook

Broader market dynamics also influence gold’s trajectory. Speculative interest in COMEX gold declined, with net long positions dropping by 16,251 contracts to 203,937 for the week ending Dec. 17. Meanwhile, Russia’s central bank held its key rate steady at 21%, surprising markets.

Higher interest rates globally dampen gold’s appeal as a non-yielding asset, but easing inflation and a dovish Fed outlook provide pockets of optimism.

Key Insights:

  • Immediate Resistance: $2,639; Next levels: $2,663, $2,692.
  • Immediate Support: $2,602; Next levels: $2,580, $2,560.
  • RSI: 51, reflecting cautious sentiment.
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ABOUT THE AUTHOR See More
Arslan Butt
Index & Commodity Analyst
Arslan 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.
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