Gold price supported by Fed policy and geopolitics after 1% rebound on Boxing day
Gold’s rally is being driven by broader economic and geopolitical factors
Gold prices continued their upward momentum on Boxing day, with the metal showing resilience in a bullish channel and rising nearly 1% to reach a five-day high.
Further insights point to potential for a more substantial recovery at a time when traders are closely watching economic signals and geopolitical events that could influence Gold’s trajectory in the near term.
At the core of Gold's recent rise is its recovery from the fib 50% retracement level, which has supported the bullish trend. The price rally was capped at the fib 0.786% level, aligning with the 50-period Exponential Moving Average (EMA) at $2,640, as seen on the 4-hour chart. Gold is currently trading at $2,633, just slightly off this key level, maintaining its upward bias.
Gold price dynamics (November-December 2024). Source: TradingView
Gold’s rally is being driven by broader economic and geopolitical factors. Data from late December showed a reduction in jobless claims in the U.S., pointing to a resilient labor market that may keep pressure on the Federal Reserve to maintain a steady interest rate policy. This backdrop is favorable for Gold, as lower rates generally boost the appeal of non-yielding assets like the precious metal. With a 28% gain year-to-date, Gold has already demonstrated strong performance, reaching an all-time high of $2,790.15 in late October, largely due to significant rate cuts by the Fed and heightened geopolitical tensions.
Gold price prediction: $2,640 resistance holds as RSI suggest further upside
Supporting this positive outlook, the Relative Strength Index (RSI) is moving above the 50 mark, without yet reaching overbought conditions. This suggests that the metal still has room for further upside, with a break above the 50 EMA potentially paving the way for a more extended recovery in the coming weeks.
Looking ahead, market participants are anticipating a shift in economic policy, particularly with the return of Donald Trump to the White House. Plans for tariffs, deregulation, and tax reforms could further shape the economic environment, adding more layers of uncertainty that would likely support Gold's role as a hedge against both inflation and geopolitical instability.
Thus, Gold’s price outlook remains strong, supported by a combination of technical indicators, economic data, and geopolitical risks. A potential break above the $2,640 level could signal a broader-term recovery, with prices targeting new highs if the supportive factors continue to unfold.
Gold broke price records 40 times throughout the year, reaching a peak of $2,790 per ounce in October. Gold prices surged was driven by rising geopolitical tensions, central bank purchases, and the US Federal Reserve's rate cut cycle.
