Gold (XAU/USD) retreated slightly from a record high of $4,526 during early European trading on Wednesday as traders booked profits. Strong US GDP data also weighed on the yellow metal, as a robust economy tends to support the US Dollar (USD), making Gold more expensive for non-US buyers and exerting downward pressure on prices.
Nonetheless, the downside may be limited, with persistent geopolitical tensions—particularly the US-Venezuela conflict—supporting safe-haven demand.
Fed rate cut expectations continue to support Gold
Expectations of further US Federal Reserve (Fed) rate cuts next year could provide underlying support for Gold. Markets are pricing in multiple rate reductions in 2026 amid signs of easing inflation and slowing job growth. Lower interest rates reduce the opportunity cost of holding non-yielding assets like Gold, maintaining its appeal as a store of value.
Financial markets are likely to remain subdued ahead of the Christmas holiday, with traders awaiting the release of US Initial Jobless Claims data later on Wednesday. Consensus estimates were 223,000 claims for the week ending December 13, compared to 224,000 in the prior week.
Geopolitical tensions and US economic data
Recent developments in Venezuela continue to influence market sentiment. Venezuela’s parliament approved legislation criminalizing activities that could hinder navigation or commerce, including interference with oil tankers, following US actions targeting the country’s oil exports.
US macro data remains mixed. GDP expanded at a 4.3% annualized pace in Q3, above the 3.3% expectation and following 3.8% growth in Q2. Meanwhile, the Conference Board’s Consumer Confidence Index fell to 89.1 in December from 92.9 in November, reflecting softer household sentiment.
US political commentary has added to uncertainty. President Donald Trump emphasized that the next Fed Chair should support significant rate cuts, suggesting candidates who disagree would not be considered. White House adviser Kevin Hassett also criticized the Fed for not lowering rates fast enough despite stronger-than-expected GDP growth. These statements have raised concerns about Federal Reserve independence, keeping the USD under pressure and supporting Gold.
Technical outlook: bullish with caution
Technically, Gold remains in a long-term bullish trend, supported above the 100-day Exponential Moving Average (EMA) on the daily chart. Bollinger Bands suggest strong trend continuation, but the 14-day Relative Strength Index (RSI) above 70 signals overbought conditions. This indicates that further gains may be tempered by short-term consolidation or profit-taking.
Near-term, sustained trading above the $4,500 psychological level could see Gold challenge $4,550 and potentially the $4,600 mark. On the downside, immediate support is at the December 22 low of $4,338, with further weakness potentially testing the December 17 low of $4,300.
Ready to start trading Forex? Join iXBroker today and kick-start your trading journey now!
