Gold Holds Its Ground as Fed Uncertainty and Geopolitical Risks Keep Buyers Alert

Technical Strength Contradicts Profit-Taking Pressure

Gold remains caught between two forces this week. The precious metal hit a seven-week high of $4,353 before pulling back as traders locked in profits, yet the underlying trend tells a different story. Currently trading around $4,302, XAU/USD still boasts a weekly gain exceeding 0.51%, with the Relative Strength Index flashing overbought signals—a sign that buying momentum remains potent despite the near-term consolidation.

From a technical perspective, the bullish narrative is intact. If gold breaks above this week’s peak of $4,353, the all-time high of $4,381 comes into focus, followed by psychological targets at $4,400, $4,450, and $4,500. On the downside, a dip below the $4,285 level could test support at $4,250 and $4,200, though such a breakdown looks unlikely given current market conditions.

Fed’s Mixed Signals Leave Markets in a Fog

The central bank’s recent commentary highlights just how muddled monetary policy guidance has become. Among the Federal Reserve’s recent decisions, dissenters offered contrasting views that underscore the policy confusion weighing on markets. Kansas City Fed Jeffrey Schmid argued inflation remains “too hot” and called for a more restrictive stance, while Chicago Fed President Austan Goolsbee took a dovish tone, projecting 50 basis points of rate cuts if economic conditions evolve as expected. Cleveland Fed Beth Hammack echoed concerns about persistent price pressures, yet Philadelphia Fed Anna Paulson offered a more optimistic inflation outlook, citing the waning impact of tariffs.

This cacophony of voices creates uncertainty about the Fed’s true policy path in 2025. The lack of fresh Consumer Price Index data—obscured by ongoing shutdown distortions—leaves traders guessing about the true inflation trajectory. Gold thrives in such uncertainty, as investors hedge against the possibility that rate cuts could disappoint or be delayed.

Weak Labor Data Adds to Gold’s Appeal

The latest jobless claims data provided an unintended boost to bullion. Initial jobless claims surged to 236,000 for the week ending December 6, jumping sharply from a revised 192,000 the previous week. Though Continuing Claims ticked down to 1.838 million from 1.937 million, the headline figure suggests the labor market is cooling faster than expected—a development that complicates the Fed’s calculus and supports gold’s safe-haven demand.

US Treasury yields remain elevated, with the 10-year benchmark at 4.19%, but real yields—which inversely track gold prices—have softened to 1.872%. This decline provides tailwind support for precious metals. Meanwhile, the US Dollar Index, hovering at 98.35, offers little to no headwind for gold priced in dollars. In GBP terms, while specific conversions depend on dollar-sterling dynamics, gold’s weakness in greenback terms translates to relative stability when viewed through alternative currency lenses like the 4300 USD conversion rates.

Geopolitical Tensions Underpin Medium-Term Demand

Beyond economics, geopolitical friction continues to support gold’s bid. Russia-Ukraine peace talks have stalled, with the White House expressing frustration over Ukraine’s reluctance to accept the proposed US peace framework. With negotiations in limbo, investors remain cautious, viewing gold as insurance against further escalation or unexpected geopolitical shocks.

The Bigger Picture

Gold’s resilience reflects a market caught between hope and caution. While traders are willing to book some profits after a strong run, the combination of Fed policy fog, weakening labor metrics, and unresolved geopolitical risks provides a solid floor for prices. For bulls, the path toward $4,381 and beyond remains viable, though near-term consolidation is a healthy sign of trend maturity rather than reversal. Until clearer signals emerge from inflation data and policy guidance, gold looks well-positioned to maintain its bid in the weeks ahead.