Gold price (XAU/USD) pulls back from its record high near $4,550 during Asian trading hours on Monday as traders engage in profit-taking ahead of the year-end holidays. A modest recovery in the US Dollar (USD) is also weighing on the precious metal, as a firmer Greenback makes Gold more expensive for non-US buyers, adding pressure to prices.
Despite the short-term correction, the broader trend remains firmly bullish. Gold has surged nearly 70% in 2025, marking its strongest annual performance since 1979. Expectations that the US Federal Reserve (Fed) could deliver interest rate cuts in 2026 may limit downside risks, as lower rates reduce the opportunity cost of holding non-yielding assets such as Gold. Ongoing geopolitical tensions further reinforce demand for the traditional safe-haven.
Market conditions are expected to remain quiet amid thin liquidity ahead of the New Year holidays. Later on Monday, investors will monitor the US Pending Home Sales report for November for fresh direction.
Market drivers keep gold capped in thin liquidity
US President Donald Trump said he made “a lot of progress” in discussions with Ukrainian President Volodymyr Zelensky regarding a possible peace deal. However, he noted that there has been no clear breakthrough on territorial issues and that negotiations could take several more weeks.
Recent US labor market data showed weekly Initial Jobless Claims for the week ending December 20 fell to 214,000 from 224,000 previously, beating market expectations of 223,000 and offering limited short-term support to the US Dollar.
Trump also reiterated last week that he expects the next Fed Chair to keep interest rates low and not “disagree” with him, comments that have reignited concerns over the independence of the Federal Reserve and added to policy uncertainty.
The Fed has cut interest rates three times this year, and markets continue to price in two additional rate cuts in 2026. According to the CME FedWatch tool, there is currently around an 18.3% probability of a rate cut at the Fed’s next policy meeting in January.
Technical outlook: bullish trend intact but caution warranted
Gold is trading lower on the day, but the broader technical outlook remains constructive. Prices continue to hold above the key 100-day Exponential Moving Average on the daily chart, while widening Bollinger Bands point to favorable conditions for further upside over the medium term.
That said, momentum indicators signal near-term caution. The 14-day Relative Strength Index remains above 70, indicating overbought conditions and suggesting that the recent rally may pause for consolidation before the next potential leg higher.
The record high at $4,550 acts as immediate resistance. A decisive break above this level could pave the way for a move toward the $4,600 psychological mark. On the downside, initial support is seen at the December 23 low of $4,430. A break below this level would expose further support at $4,338, followed by the December 17 low near $4,300.
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