Gold Pulls Back from Seven-Week Highs Ahead of US NFP Data
GlobePRwire
Gold price (XAU/USD) edged lower on Tuesday during early European trading, retreating from a seven-week high as profit-taking emerged among traders. The safe-haven metal struggled to maintain momentum below $4,300, weighed down by optimism over Ukraine peace talks and subdued buying from short-term futures traders.
Market participants now await the US Nonfarm Payrolls (NFP) report, which could provide crucial guidance on the Federal Reserve’s (Fed) monetary policy path. LFtrade professionals simplify complex points through a detailed and accessible analysis.
Profit-Taking Weighs on Gold
After reaching multi-week highs, Gold has faced natural profit-taking pressure in early sessions. Traders who accumulated positions during the recent rally have partially liquidated gains, causing a pullback in the XAU/USD price. Short-term futures positioning also indicated weak long-liquidation activity, suggesting the rally may pause before potentially resuming.
Optimism surrounding Ukraine peace talks added further pressure on the yellow metal. As the potential for resolution in the ongoing conflict increases, demand for safe-haven assets such as Gold typically declines. However, analysts emphasize that any downside might remain contained due to underlying monetary support and persistent macroeconomic uncertainties.
Fed Cuts and the Interest Rate Outlook
The US Federal Reserve implemented its third interest rate cut of the year last week, signaling a potential continuation of easing in 2026. While lower rates reduce the opportunity cost of holding non-yielding assets like Gold, recent official projections suggest a cautious outlook. According to the Summary of Economic Projections (SEP), also known as the “dot plot,” the median forecast anticipates only one 25-basis-point (bps) rate cut by the end of 2026.
Despite this, financial markets are pricing in probabilities of at least two rate reductions, reflecting uncertainty around inflation risks and the US labor market. Fed funds futures currently imply a 75.6% chance of a rate hold at the January meeting, highlighting the cautious stance among investors.
Fed officials continue to influence market sentiment. New York Fed President John Williams noted that current monetary policy is well-positioned to navigate elevated employment risks and moderately reduced inflation pressure.
Meanwhile, Fed Governor Stephen Miran reiterated that current policies remain overly restrictive and is likely to maintain his role at the central bank until a successor is confirmed, providing continuity in the Fed’s policy approach.
US Economic Data in Focus: NFP, Retail Sales, and PMI
Market attention is firmly fixed on the upcoming US Nonfarm Payrolls (NFP) report, delayed due to the government shutdown. The NFP release is a critical economic indicator reflecting the health of the US labor market, which directly influences expectations for Fed rate adjustments.
A weaker-than-expected NFP reading could reinforce the case for future rate cuts, potentially boosting Gold demand as investors seek shelter in the non-yielding asset. In addition, the US Retail Sales and Purchasing Managers Index (PMI) reports, also scheduled for release, will provide further insight into economic momentum and consumer activity, helping shape market expectations for monetary policy.
Technical Outlook: Gold Holds Long-Term Uptrend
From a technical perspective, Gold retains a constructive outlook on the four-hour timeframe, despite Tuesday’s early weakness. The price remains well-supported above the 100-day Exponential Moving Average (EMA), suggesting that the path of least resistance favors the upside.
The Bollinger Bands are widening, indicating increased volatility potential, while the 14-day Relative Strength Index (RSI) stands near 60.0, reflecting strengthening bullish momentum. These indicators suggest that the recent pullback may represent a temporary pause in a broader uptrend rather than a reversal.
Resistance levels are clear to monitor. The immediate hurdle lies at the December 15 high of $4,350, followed by the upper Bollinger Band at $4,365, and the all-time high near $4,381. A sustained rally above these levels could signal renewed upside momentum for XAU/USD.
On the downside, initial support is seen at the December 15 low of $4,285, followed by the December 12 low of $4,257. Further selling could test the 100-day EMA at $4,210, a critical level for maintaining the long-term uptrend.
Key Takeaways
Key takeaways indicate that Gold prices have retreated from seven-week highs due to profit-taking and renewed optimism over Ukraine peace talks. The Fed’s monetary policy remains cautiously supportive, with interest rate cuts anticipated but likely limited according to official projections.
Market attention is focused on the US NFP report, which could drive Gold volatility and influence future rate expectations. Technical indicators continue to point to a bullish long-term trend, with key support at $4,285 and resistance between $4,350 and $4,381.
As traders weigh geopolitical developments, Fed policy, and upcoming US economic data, Gold may continue to experience short-term volatility, but its long-term bullish bias remains intact. Investors should monitor technical levels closely while staying alert to NFP-driven market reactions in the coming sessions.