Article by: ETO Markets
Gold prices (XAU/USD) gained some traction during the Asian session on Wednesday, recovering from a three-day losing streak that brought the metal to its lowest level since September 20, around the $… mark. This slight rebound lacks any specific fundamental drivers and is likely due to traders adjusting positions ahead of the U.S. consumer inflation report. The inflation data is critical, as it may shape expectations about the Federal Reserve’s rate-cut trajectory, potentially impacting the demand for non-yielding assets like gold.
In the broader market context, the U.S. Dollar has entered a consolidation phase near its highest level since early May, following recent strength. This USD strength, combined with concerns over U.S. President-elect Donald Trump’s protectionist trade policies, is raising fears of global economic impact, creating demand for safe-haven assets like gold. Additionally, weakness in equity markets has further supported gold prices amid this risk-off sentiment. However, the upside for gold remains limited, as Trump’s anticipated expansionary fiscal policies could drive inflation higher, which in turn may reduce the likelihood of aggressive Fed rate cuts. Consequently, while gold may benefit from short-term safe-haven demand, expectations of persistent inflation could cap significant gains.
From technical perspective, after three days of decline, this indicates a possible retracement or correction in XAU/USD after hitting a support level around $…, aligned with the October low. If the price continues to decline and breaks the support at $…, which aligns with the 100-day Simple Moving Average (SMA), it may suggest a further bearish move in the short to medium term. Conversely, if the price reaches the resistance level of $…, aligning with the 50-day SMA, it may indicate that gold has already completed its retracement and resumed a bullish trend. Upon reaching this level, the price could potentially target the yearly high of $….
