Gold prices (XAU/USD) increased by 0.4% to almost $4,230 during trading on Friday in Europe. The yellow metal has been maintaining a stable position, oscillating within a narrow range of $4,164 to $4,265 for the last four days.
The outlook for precious metals appears optimistic, with analysts anticipating that the US Federal Reserve will announce interest rate cuts in its monetary policy statement on Wednesday. A reduction in interest rates from the Fed would likely benefit gold, which doesn’t generate yield.
Data from CME’s FedWatch tool indicates an 87% probability that the Fed will lower interest rates by 25 basis points (bp) to a range of 3.50-3.75% in December, fueled by weakening conditions in the U.S. labor market.
If the anticipated 25bp cut occurs, investors will likely focus more on monetary policy directions in 2026. It’s expected that Fed officials will adopt a cautious approach given that inflation has remained significantly above the 2% target for a while now.
The US dollar (USD) has been struggling to maintain its recent lows during Friday’s European trading session, with the US dollar index (DXY) cautiously hovering around a five-week low close to 98.75.
Gold Technical Analysis
Currently, XAU/USD is trading around $4,190 during European trading hours. The 20-day exponential moving average (EMA) is positioned at $4,147.96, and the price is above this moving average, suggesting a positive outlook. If there is a pullback toward the 20-day EMA, it should find support, provided its slope remains favorable.
The 14-day Relative Strength Index (RSI) rebounded after approaching 60.00, indicating ongoing momentum as long as it maintains this level.
With the 20-day EMA still positive and buying interest persisting, there’s confirmation of an upward trend from the low of $3,933.90 on October 28, with support noted near $4,110. If the price closes below this trend line, it might signal a deeper pullback toward the significant level of $4,000. Conversely, breaking above this line might create space for additional upside.
Gold FAQ
Historically, gold has been a significant part of human economy, used as a store of value and a medium for trade. Today, beyond its allure and use in jewelry, it’s seen as a safe haven, appealing particularly in unstable times. Gold is also viewed as a hedge against inflation and currency depreciation because it’s not reliant on any specific issuer or government.
Central banks are the main holders of gold. Their strategy often includes purchasing gold to diversify their foreign reserves and boost confidence in their currency during crises. In 2022, central banks added 1,136 tonnes of gold worth around $70 billion, marking the highest annual purchases on record. Many emerging economies, like China, India, and Türkiye, are actively increasing their gold reserves.
The price of gold typically shows an inverse relationship with the US dollar and US Treasuries, which are key safe-haven assets. When the dollar weakens, gold usually rises, allowing central banks and investors to diversify their portfolios in turbulent times. Furthermore, rising stock markets can often lead to lower gold prices, while downturns in riskier assets tend to support gold.
Gold prices fluctuate due to several factors. Issues like geopolitical tensions or fears of a recession can drive prices up as investors seek safety. While lower interest rates typically support gold prices, rising costs can exert downward pressure. Ultimately, much of the price movement relies on the US dollar’s performance, given that gold is priced in dollars. A stronger dollar could suppress gold prices, while a weaker dollar may lead to higher prices.
