Gold Price Outlook: Can XAU/USD Break Above $2,691 Resistance?

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Gold prices edged slightly lower on Wednesday, trading at $2,674.97 as cautious sentiment dominated ahead of the U.S. Consumer Price Index (CPI) report.

Set to release at 13:30 GMT, the inflation data is expected to shed light on the Federal Reserve’s rate trajectory, especially after last week’s unexpectedly strong jobs report.

Economists polled by Reuters predict a 2.9% annual rise in December CPI, compared to 2.7% in November. The monthly increase is projected at 0.3%, consistent with ongoing inflationary pressure. A positive surprise in inflation data could challenge the Federal Reserve’s easing plans, possibly impacting gold’s appeal as a hedge against inflation.

Gold remains a popular investment in times of economic uncertainty, especially as President-elect Donald Trump prepares for his second term. His fiscal policies, which many analysts believe could stoke inflation, have traders keeping a close eye on precious metals. Despite this, higher interest rates—expected to persist through early 2025—reduce the appeal of non-yielding assets like gold.

Technical Setup: Gold’s Key Resistance Levels

From a technical perspective, gold prices are consolidating within an upward channel, suggesting potential bullish momentum. Immediate resistance lies at $2,691.76, followed by higher targets at $2,706.79 and $2,721.31. These levels align with key Fibonacci retracements and the channel’s upper boundary.

On the support side, $2,670 serves as a critical pivot point, reinforced by the 50-day EMA at $2,669.74. Failure to maintain this level may see prices test $2,657 and $2,638.31, with a further drop potentially targeting $2,622.26.

The formation of a bullish engulfing candle near the $2,670 pivot point signals buyer confidence. However, breaking $2,691.76 remains crucial for confirming an extended uptrend. Conversely, a sustained move below $2,657 could reinforce bearish momentum, driving prices lower.

Market Sentiment and Broader Trends

Market sentiment remains cautious as traders balance optimism over easing inflation with skepticism about Federal Reserve policies. The Producer Price Index (PPI) report earlier this week showed a slight annual increase, fueling speculation that the Fed might pause its rate-cut cycle in its January meeting.

GOLD Price Chart - Source: Tradingview
GOLD Price Chart – Source: Tradingview

Gold’s role as a hedge against inflation continues to attract investors, especially as the Fed’s interest rate path becomes clearer. However, higher yields on U.S. Treasury bonds could suppress bullish momentum.

Key Takeaways:

  • Inflation Data Awaited: December’s CPI report will shape expectations for Federal Reserve policies, directly influencing gold prices.

  • Resistance Levels: Breaking $2,691.76 could lead gold to higher targets of $2,706.79 and $2,721.31.

  • Support Zones: A failure to hold $2,670 may push prices to $2,657 or lower, testing bearish thresholds.

With U.S. inflation data looming and gold prices consolidating near key resistance, traders should prepare for potential volatility. Stay updated for actionable insights as the market reacts to these critical economic developments.

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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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