Gold (XAU/USD) finds fresh buying interest on dips near the $4,428–4,427 area and advances to a one-week high during Tuesday’s Asian session, supported by a mix of geopolitical tensions and dovish Federal Reserve expectations.
Heightened risks stemming from US military strikes in Venezuela, rising political frictions between Saudi Arabia and the UAE, ongoing unrest in Iran, and the prolonged Russia-Ukraine war continue to underpin demand for traditional safe-haven assets. This backdrop, combined with expectations of lower US interest rates, keeps the near-term bias for bullion tilted to the upside.
Fed rate cut bets and softer dollar support gold
Market participants continue to price in the likelihood of two additional interest rate cuts by the Federal Reserve later this year, a view reinforced by mixed US PMI readings for December released on Monday.
At the same time, concerns over the Fed’s independence under US President Donald Trump’s administration have weighed on the US Dollar, pulling it back from a nearly four-week high set earlier in the week. The softer USD environment provides additional support to non-yielding Gold, which tends to benefit from lower interest rate expectations.
Geopolitical developments keep risk sentiment fragile
Comments from President Trump on Sunday added to market unease after he warned that the US could launch a second military strike on Venezuela if cooperation from the remaining administration is not forthcoming.
He also cautioned that Colombia and Mexico could face military action should they fail to curb the flow of illicit drugs into the US. These remarks have amplified fears of broader regional instability in Latin America.
Separately, Saudi Arabia has publicly accused the United Arab Emirates of undermining its national security, while the lack of progress toward a Russia-Ukraine peace agreement continues to weigh on global risk sentiment, further supporting Gold for a second straight day.
Mixed US data fails to dent dovish outlook
On the macroeconomic front, S&P Global reported that the US Manufacturing PMI held steady at 51.8 in December, signaling continued expansion. In contrast, the ISM Manufacturing PMI slipped further into contraction territory, falling to 47.9 from 48.2 in November.
The mixed data has done little to challenge expectations of Fed easing, keeping the US Dollar on the defensive and lending additional support to bullion. Markets largely expect the Fed to cut rates as early as March and deliver at least one more reduction before year-end.
Focus turns to US jobs data and key resistance levels
Looking ahead, traders will monitor a fresh batch of US macroeconomic releases due later this week for further clues on the Fed’s policy path. However, the spotlight remains firmly on Friday’s US Nonfarm Payrolls report, which is likely to drive near-term USD direction and provide clearer guidance for Gold’s next move.
Technical outlook: upside momentum remains intact
From a technical standpoint, the recent breakout above the 100-hour Simple Moving Average (SMA), followed by a move through the $4,445–4,450 congestion zone, is viewed as a constructive signal for XAU/USD bulls.
Momentum indicators point to strengthening upside bias, with the MACD turning positive on the hourly chart and the RSI rising toward overbought territory. As long as prices hold above the rising 100-hour SMA near $4,373, pullbacks are likely to remain limited, keeping the near-term outlook for Gold broadly positive.
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