Gold (XAU/USD) continues to attract fresh buying interest, extending its rally above the $4,350 level during early European trading on Wednesday. The precious metal is up roughly 65% so far this year and is on track to post its strongest annual performance since 1979, underscoring the strength of the current bullish cycle.
The rally is being underpinned by expectations of further US interest rate cuts in 2026. A lower interest rate environment reduces the opportunity cost of holding non-yielding assets, making Gold more attractive to investors seeking capital preservation. As markets increasingly price in additional Federal Reserve easing, demand for the yellow metal remains well supported.
Geopolitical uncertainty is adding another layer of support. Ongoing tensions between Israel and Iran, alongside persistent friction between the US and Venezuela, have reinforced Gold’s appeal as a traditional safe-haven asset. In periods of heightened uncertainty, investors typically rotate toward assets perceived as reliable stores of value, a dynamic that continues to benefit Gold.
Factors limiting upside momentum
Despite the strong bullish backdrop, some developments could cap further gains in the near term. The Chicago Mercantile Exchange (CME) Group recently raised margin requirements for gold and silver futures, a move that may encourage profit-taking and portfolio rebalancing. Higher margin costs often force leveraged traders to reduce exposure, which can temporarily weigh on prices.
In addition, reports of progress toward a potential peace agreement in Ukraine could ease some geopolitical risk premium embedded in Gold prices, potentially triggering short-term corrective moves.
Markets await US data amid thin liquidity
Investor attention is now turning to the release of US Initial Jobless Claims later on Wednesday. Economists expect new claims to rise modestly to 220,000 for the week ending December 27, compared with 214,000 previously. Trading conditions are likely to remain thin as markets head into the New Year holiday period, which could amplify price swings.
Fed signals keep gold bulls in control
At its December meeting, the Federal Reserve cut interest rates by 25 basis points, bringing the federal funds rate to a target range of 3.50%–3.75%. Policymakers supporting the decision pointed to growing downside risks in the labor market and easing inflation pressures. However, the decision exposed divisions within the committee, with Fed Governor Stephen Miran favoring a larger cut, while Chicago Fed President Austan Goolsbee and Kansas City Fed President Jeff Schmid dissented in favor of holding rates steady.
Minutes from the December 9–10 FOMC meeting showed that most officials remain open to further rate reductions if inflation continues to decline, though disagreement persists over the timing and extent of future cuts. Following the release of the minutes, market-implied odds of a January rate cut slipped slightly to around 15%, according to the CME FedWatch tool.
Gold technical outlook remains bullish
From a technical perspective, Gold maintains a constructive outlook. Prices remain comfortably above the 100-day Exponential Moving Average, while Bollinger Bands continue to widen, signaling expanding volatility in an upward trend. The 14-day Relative Strength Index is trending higher above its midpoint, confirming positive near-term momentum.
The next key resistance level for XAU/USD is located near the upper Bollinger Band around $4,520. A sustained move above this area could pave the way for a retest of the all-time high near $4,550, with the $4,600 psychological level coming into view beyond that. On the downside, initial support is seen in the $4,305–$4,300 zone, aligned with the December 29 low. A deeper pullback could expose the December 16 low around $4,271, though broader price action continues to favor the bulls.
Ready to start trading Forex? Join iXBroker today and kick-start your trading journey now!
