Expectations of Fed rate cuts and dollar weakness... Checking the trend of gold prices recovering to $4,260

Targeting the Upper Range of the Box… 200-Day Moving Average as the Final Defense Line

Since the Asian market open, buying interest at lows has entered the gold(XAU/USD) market, ending the correction trend and seeking an opportunity for rebound. After last week’s decline, spot gold is hovering around $4,260, with sell-offs aiming for lock-in(Lock-in) profits and demand from buyers wanting to enter at low prices.

The one-month low weakness of the dollar highlights the relative value of gold, an interest-free asset. However, market participants remain cautious. The dominant ‘wait-and-see mode’ is due to awaiting the December FOMC statement scheduled for Wednesday and subsequent comments from Chair Jerome Powell.

Signals from inflation and employment… Increasing pressure for rate cuts

Economic indicators are sending favorable signals for the Fed’s rate cut scenario. US September personal consumption expenditures(PCE) inflation rose 2.8% year-over-year, meeting expectations, and core PCE, excluding volatile items, continues its slowdown from 2.9% to 2.8%.

Signs of cooling are also being observed in employment indicators. These macroeconomic changes are amplifying voices within the Fed advocating for ‘slowing down.’ The CME FedWatch( market assesses about a 90% probability of a 25 basis point rate cut at this FOMC, with an atmosphere that does not rule out additional cuts next year.

Geopolitical tensions are also supporting safe-haven demand. Russia’s attacks on Ukraine’s energy infrastructure and deadlock in peace negotiations are acting as factors restraining risk asset inflows.

) The market’s real focus is ‘the path after the rate cut’

More important than the rate cut itself is the future trajectory that the Fed will chart. Investors will look at the revised dot plot(Dot Plot) and Chair Powell’s press conference to gauge the pace of rate cuts next year. The outcome is expected to determine whether spot gold will break out of its current box range.

Technical indicators on gold’s ‘truth and falsehood’

$4,190 level supported by the 200-day moving average

From a technical perspective, $4,190, where the 200-hour exponential moving average(EMA) is located, is a short-term inflection point. This level has served as dynamic support for the lower bound of spot gold since early this month.

If this line is broken, technical sell-off volumes may emerge, potentially pushing prices down to the monthly low of $4,163–$4,164. Further declines could damage the short-term upward trend formed since late October, possibly dropping below $4,100.

Resistance at $4,250–$4,260

On the upside, the thick resistance zone at $4,250–$4,260 is a challenge. To break through this upper boundary of the box range on a closing basis, prices need to clearly surpass $4,277–$4,278, enabling attempts to recover the psychological resistance level of $4,300. Experts see reclaiming $4,300 as a signal of resuming the rally formed after late November.