Amid a bullish USD, the gold market pares back some of its small rebound gains, with attention still on the US CPI

The Gold price (XAU/USD) pares back part of its modest intraday recovery gains but maintains a position above the $2,600 level as the European session approaches on Wednesday. Investor caution surrounding US President-elect Donald Trump's proposed trade tariffs and their potential global economic impact contributes to a shift towards safer assets like gold. Additionally, positioning ahead of the US consumer inflation report provides further support to the precious metal.

Meanwhile, the US Dollar (USD) remains strong, trading near its highest point since early May, fueled by expectations that Trump's expansionary policies could drive inflation higher and limit the Federal Reserve’s capacity to cut interest rates. Elevated US Treasury bond yields continue to weigh on further upside potential for non-yielding assets like gold. Nevertheless, XAU/USD appears to have halted a three-day decline, recovering from Tuesday’s low around the $2,590-$2,589 range, its lowest level since September 20.

From a technical standpoint, gold’s resilience below the 38.2% Fibonacci retracement level of the June-October rally and subsequent upward moves signal a cautious outlook for bearish traders. Daily chart oscillators remain deep in negative territory but are not yet in oversold conditions, indicating a potential bearish bias for gold’s trajectory.

Thus, any upward move is likely to face selling pressure around the $2,630-$2,632 resistance zone. A sustained buying spree could propel gold toward the $2,650-$2,655 barrier, with the next major hurdle near $2,670. Clearing this level would indicate that the corrective pullback from the record high has ended, with the $2,700 mark as a key target.

Conversely, bearish traders may look for a confirmed break below the $2,600 mark and the 38.2% Fibonacci retracement level before making new positions. A decline from this level could potentially lead gold towards the $2,540 region, which is strengthened by the confluence of the 100-day Simple Moving Average (SMA) and the 50% Fibonacci level. This region could serve as a strong support base for XAU/USD, but if breached, it would signal a fresh bearish phase.

 

 

 

 

 

 

 

 

 

 

Paraphrasing text from "FX Street" all rights reserved by the original author.