Gold pulls back under pressure, double hit from dollar rebound and profit-taking

Gold prices face correction pressure during Asian trading hours. XAU/USD broke below the $4350 level, retreating from recent seven-week highs, primarily due to a dual impact of a strengthening dollar and profit-taking. However, as Fed rate hike expectations reflected in futures markets heat up and geopolitical tensions persist, the downside space for gold may be effectively limited.

Long-term upside potential amid short-term correction

From a technical perspective, although gold showed a negative trend on the day, the overall structure remains constructive. On the four-hour chart, the precious metal’s price remains firmly above the 100-day exponential moving average, with Bollinger Bands expanding, and the 14-day Relative Strength Index hovering above the midline, indicating ongoing upward momentum.

Key support and resistance levels warrant attention. If buying interest returns and breaks through the upper Bollinger Band at 4352, gold could challenge the historical high at 4381 again, then aim for the psychological level of 4400. Conversely, if the decline continues, the December 17 low at 4300 will serve as the first line of defense, with further support at December 16’s 4271. A break below the 100-day moving average at 4233 would signal stronger selling pressure.

Economic data and policy expectations drive market sentiment

Fed officials have shown mixed attitudes recently. Federal Reserve Board member Christopher Waller stated on Wednesday support for further rate cuts to return to neutral but warned against hasty action in a high-inflation environment. In contrast, Atlanta Fed President Raphael Bostic has a hawkish stance, opposing last week’s rate cut decision and believing that unless inflation drops significantly, there will be little room for rate cuts next year.

The labor market data continues to slow. U.S. non-farm payrolls increased by only 64,000 in November, well below the revised decline of 105,000 in the previous month, with the unemployment rate rising from 4.4% to 4.6%. This data reinforces market expectations for further easing by the Fed. According to LSEG calculations, the probability of a rate cut by the Fed next month has risen to 31%, up from 22% previously.

Upcoming November CPI data is a focal point. Market expectations are for a year-over-year increase of 3.1%, with core CPI expected to rise 3.0% YoY. Additionally, Thursday evening will see the release of weekly U.S. jobless claims, which will further guide market judgment on future policy paths.

Geopolitical risks support safe-haven demand

Escalating tensions between Venezuela and the U.S. provide support for gold. The Venezuelan government has ordered the navy to escort oil tankers in response to Trump administration’s threats of “blockades” against its oil industry. Such geopolitical risks typically drive capital flows into traditional safe-haven assets, including gold, providing structural support for the metal.

The positive correlation between interest rate expectations and safe-haven assets remains valid. Lower interest rates reduce the opportunity cost of holding yieldless gold, resonating with market expectations of easing by the Fed, and laying a foundation for gold’s medium-term trend.