Gold (XAU/USD) extends its rally to near seven-week highs, trading above the $4,300 level during Asian hours on Wednesday. The precious metal is gaining traction as fresh US data suggest that the labor market, while still relatively resilient, is showing clearer signs of cooling. This backdrop has reinforced expectations of further interest rate cuts by the US Federal Reserve (Fed), weighing on the US Dollar (USD) and boosting demand for non-yielding assets such as Gold.
A softer interest rate outlook tends to lower the opportunity cost of holding Gold, making the metal more attractive to investors. The Fed delivered its third 25-basis-point rate cut at last week’s December policy meeting, but policymakers remain divided on the path ahead. While the median projection points to just one rate cut in 2026, several officials see no need for further easing.
Markets now turn their attention to upcoming comments from Fed officials later on Wednesday, with New York Fed President John Williams and Atlanta Fed President Raphael Bostic scheduled to speak. Any hawkish signals could lend support to the Greenback and cap gains in USD-denominated commodities in the near term.
Looking ahead, US inflation data will be key in shaping rate expectations. The November Consumer Price Index (CPI) report is due on Thursday, followed by the Personal Consumption Expenditures (PCE) Price Index on Friday, both of which are closely watched by the Fed.
Market drivers: Gold supported by mixed US data
Recent US macroeconomic releases have underpinned Gold’s advance. The US Bureau of Labor Statistics reported that Nonfarm Payrolls increased by 64,000 in November, rebounding from a revised decline of 105,000 in October and exceeding market expectations of a 50,000 gain. Despite the headline beat, underlying details pointed to easing labor market conditions, with the Unemployment Rate rising to 4.6% from 4.4%.
Wage growth also moderated, as Average Hourly Earnings rose just 0.1% month-on-month in November, following a 0.4% increase in October. Meanwhile, US Retail Sales were unexpectedly flat in October, undershooting forecasts and reinforcing concerns that consumer momentum is slowing.
Adding to market uncertainty, reports indicated that US President Donald Trump is set to interview Fed Governor Christopher Waller as a potential candidate for the next Fed Chair. Separately, geopolitical tensions have also been in focus after Reuters reported that Trump ordered a blockade of all sanctioned oil tankers entering and leaving Venezuela following the seizure of a tanker near its waters last week.
Interest rate markets continue to price in a dovish tilt. Futures imply expectations for two rate cuts next year, while the probability of the Fed holding rates steady at its January meeting has risen to 75.6%, up from around 70% a week earlier, according to the CME FedWatch tool.
Gold technical outlook remains bullish
From a technical perspective, Gold remains firmly supported. On the four-hour chart, XAU/USD is holding well above the key 100-day Exponential Moving Average, preserving the broader bullish structure. Bollinger Bands are widening, signaling expanding volatility, while the 14-period Relative Strength Index (RSI) remains above its midline, confirming positive near-term momentum.
A sustained break above the upper Bollinger Band around $4,305 could set the stage for a fresh push toward the December 15 high at $4,350. A follow-through move beyond that level would open the door for a potential retest of the record high at $4,381.
On the downside, a shift in sentiment could emerge if the metal starts printing a series of lower closes. Initial support is seen at the December 16 low of $4,271, followed by the 100-day EMA near $4,220, which remains a key level to watch for bulls.
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