Gold Price Struggles Below $2,700 Despite Intraday Recovery

Gold price (XAU/USD) has regained some upward momentum following Thursday’s profit-taking from a five-week high of $2,726. However, the recovery lacks strong follow-through buying as persistent market dynamics and upcoming events keep the yellow metal under pressure.

Geopolitical Tensions and Fed Expectations Boost Haven Demand

Ongoing geopolitical risks, including the Russia-Ukraine conflict and heightened Middle East tensions, alongside uncertainties around US President-elect Donald Trump’s proposed tariff policies, continue to drive safe-haven demand for gold. Additionally, the anticipation of a third consecutive Federal Reserve (Fed) rate cut at next week’s December policy meeting supports gold’s appeal as a non-yielding asset.

However, expectations of a more cautious Fed stance on rate cuts, amid signs of stalled progress toward its 2% inflation target, limit gold’s upside. Rising US Treasury bond yields and a strengthening US Dollar (USD) — which recently reached a fresh monthly peak — further cap the metal’s potential gains. Investors are also holding back ahead of the two-day Federal Open Market Committee (FOMC) meeting starting next Tuesday, which will provide clarity on the Fed’s interest rate trajectory.

Limited Bullish Conviction Amid Divergent Drivers

While geopolitical developments offer intermittent support, broader market dynamics weigh on gold. Ukraine’s deployment of US-supplied missiles and escalations in Russian military advances highlight ongoing instability in the region. In the Middle East, Israel’s declaration to maintain its presence in Syrian territories adds to the uncertainty. These tensions drive haven flows but are counterbalanced by expectations of a less dovish Fed.

Recent US data also underscores the Fed’s cautious outlook. November’s Producer Price Index (PPI) rose by 0.4%, with annualized rates accelerating from 2.6% to 3%. Core PPI climbed 0.2%, reaching 3.4% year-over-year, surpassing expectations and reinforcing the view that inflationary progress has stalled. This aligns with market sentiment that the Fed may slow the pace of rate cuts, supporting USD strength while weighing on gold.

Technical Outlook: Key Levels to Watch

• Upside Potential:
  A sustained move above $2,700 faces resistance near $2,725-$2,726, the recent monthly high. Further gains could target $2,735, followed by the $2,748-$2,750 zone. Breaking these levels may pave the way toward the $2,775 mark, with the all-time high of $2,800 from October acting as the ultimate target.
• Downside Risks:
  Immediate support lies at $2,675-$2,674. A break below this level may trigger technical selling, potentially dragging prices toward the $2,658-$2,656 confluence, defined by the 50- and 200-period Simple Moving Averages (SMAs) on the 4-hour chart. A decisive breach here could expose the metal to further losses, targeting $2,632-$2,630 and eventually the psychological $2,600 level.

Market Focus: FOMC Meeting Next Week

The upcoming FOMC decision will be pivotal in shaping USD demand and gold’s near-term trajectory. While geopolitical tensions provide intermittent support, the broader fundamental and technical setup appears mixed, leaving traders cautious ahead of the policy announcement.