Gold Holds Strong Support as Fed Uncertainty and Geopolitical Tensions Keep Investors Cautious

Price Action and Market Sentiment

Gold remains quoted above the $4,300 threshold despite profit-taking activity as the week draws to a close. XAU/USD has retreated from its seven-week peak of $4,353, now trading around $4,302, yet the metal retains weekly gains exceeding 0.51%. Traders appear to be locking in profits ahead of the weekend pause, though underlying support remains intact from persistent macroeconomic headwinds and policy uncertainty.

Fed Officials Signal Divergence on Inflation Trajectory

The central bank continues to send mixed signals on the inflation outlook. Four Federal Reserve officials recently shared their perspectives, revealing cracks in consensus:

Kansas City Fed Jeffrey Schmid expressed concern that inflation remains “too hot,” advocating for a more restrictive monetary policy stance. He emphasized observing an economy with momentum paired with elevated price pressures, implying current policy may not be sufficiently tight.

Chicago Fed President Austan Goolsbee took a more dovish tone, suggesting the prudent approach was to await additional economic data before committing to policy direction. He remains “not hawkish” on rates moving forward, projecting approximately 50 basis points of rate cuts should economic conditions develop as anticipated.

Philadelphia Fed President Anna Paulson shifted focus to labor market softness, though she maintains optimism regarding inflation’s decline through 2025, particularly as tariff-related price impacts fade—the principal driver of overshoots this year.

Cleveland Fed Beth Hammack doubled down on inflation concerns, preferring tighter monetary conditions. She characterizes the current policy rate as hovering near neutral but would welcome a more restrictive posture to further combat price pressures.

This divergence underscores the challenge facing policymakers: scarce economic data, particularly the Consumer Price Index releases, complicates near-term rate signaling, especially given distortions from the recent US government closure.

Economic Data Signals Mixed Signals

US Initial Jobless Claims for the week ending December 6 jumped to 236,000 from a revised 192,000 the previous week—a notable uptick suggesting labor softening. Continuing Claims, however, declined to 1.838 million from 1.937 million, indicating some stabilization in longer-term unemployment trends.

The 10-year Treasury yield remains elevated at 4.19%, up four basis points, while real yields fall marginally to 1.872%—a factor supporting gold prices given the inverse correlation between real rates and bullion valuations.

Geopolitical Backdrop Sustains Safe-Haven Appeal

Russia-Ukraine peace negotiations have stalled, with US officials expressing frustration regarding negotiation pace and lack of agreement on proposed settlements. This geopolitical uncertainty reinforces gold’s allure as a portfolio hedge amid unresolved tensions.

The US Dollar Index trades flat at 98.35, offering limited headwinds to gold denominated in greenbacks, while currency weakness in broader terms provides additional support.

Technical Setup Favors Further Upside

From a charting perspective, gold remains in a pronounced uptrend. The Relative Strength Index enters overbought territory, signaling robust buying momentum despite recent profit-taking. Bulls maintain control of the narrative.

Resistance levels above the current session high of $4,353 emerge at the all-time peak of $4,381, followed by psychological barriers at $4,400, $4,450, and $4,500. Should bearish momentum develop, initial support rests at the December 11 high of $4,285, with additional weakness potentially extending toward $4,250 and $4,200 thereafter.

The confluence of Fed rate uncertainty, weakening labor statistics, and persistent geopolitical risks remains quotes among market participants as the primary catalyst anchoring gold’s multi-week strength.