Gold prices (XAU/USD) pulled back from a historic peak near $4,550 during the Asian trading session on Monday, as traders took profits ahead of the holiday. The strengthening of the U.S. dollar (USD) might put additional pressure on gold, making it pricier for buyers outside the U.S. and driving up its value.
Even with this short-term dip, gold is up nearly 70% in 2025, marking its best yearly performance since 1979. Anticipation of a possible rate cut by the U.S. Federal Reserve in 2026 might limit any significant declines for gold. Lower interest rates could lessen the opportunity cost associated with holding non-yielding assets like gold. Also, ongoing geopolitical tensions may lead to further increases in traditional safe-haven assets such as gold.
Market activity is likely to be slow as we approach the year-end and New Year holidays. Later on Monday, the U.S. is set to release its Pending Home Sales report for November.
Daily Digest Market Movement: Gold loses ground as year-end liquidity remains scarce
- U.S. President Donald Trump mentioned that there had been “considerable progress” in discussions with Ukrainian President Volodymyr Zelenskiy regarding a potential peace agreement. Despite this, he noted that no clear resolution is in sight for the ongoing territorial conflict, suggesting it could take several weeks to address.
- New jobless claims in the U.S. for the week ending December 20 dropped to 214,000, down from 224,000 the previous year, exceeding market forecasts of 223,000.
- Trump expressed his expectation that the next Federal Reserve chair will maintain low interest rates and will not turn “against” him, raising potential concerns about the Fed’s autonomy among investors and policymakers.
- This year, the Fed has lowered interest rates three times, and traders are now factoring in two more cuts for next year. The CME FedWatch tool indicates a near 18.3% chance that rates will be cut during the upcoming January meeting.
Gold remains bullish, overbought RSI signals short-term caution
On this day, gold prices registered a decline. Yet, the long-term outlook remains optimistic, especially since prices are holding above a crucial 100-day exponential moving average (EMA) on the daily chart. Additionally, the Bollinger Bands are widening, suggesting potential for further gains.
Though the trend is bullish, the 14-day Relative Strength Index (RSI) indicates overbought conditions, remaining above 70. This could mean that the upward momentum might be slowed by a necessary period of pause before the next surge.
The recent high of $4,550 acts as immediate resistance for gold. If prices manage to break through this level, a rise to the psychological threshold of $4,600 could follow.
Conversely, the first support level is located at the December 23rd low of $4,430. Should prices fall below this point, the market could test the December 22nd low of $4,338 and further drop to the December 17th low of $4,300.
