Gold prices dipped on Thursday, retreating from a four-week high hit during the previous session, as traders opted for profit-booking.

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The decline comes ahead of Friday’s U.S. jobs report, which could offer fresh clarity on the Federal Reserve’s 2025 interest rate trajectory. Bullion surged earlier this week following the release of the ADP National Employment Report, which showed weaker-than-expected private payroll growth in December. The report revealed that U.S. private employment increased by 122,000 jobs, a significant drop from November’s 146,000, and missed market expectations of 140,000.

The slowdown in job growth has raised expectations that the Federal Reserve may adopt a less aggressive approach to rate hikes this year. However, investors are now closely eyeing the U.S. jobs report to confirm whether the labor market’s strength persists or wanes. Federal Reserve minutes from the last policy meeting showed that inflation is likely to moderate but warned of potential risks stemming from President-elect Donald Trump’s protectionist trade policies, which could stoke inflationary pressures.

XAU/USD

The Impact of Fed Policy and Inflation

Gold’s status as an inflation hedge remains pivotal to its demand outlook. While the prospect of elevated inflation supports gold, rising interest rates generally dampen its appeal due to the higher opportunity cost of holding non-yielding assets. Market analysts are closely monitoring how Trump’s proposed tariffs and fiscal measures could influence inflation and, consequently, the Fed’s policy path.

HSBC has forecasted firm gold prices for 2025, noting, “Reduced physical demand and higher supply may curb rallies as gold enters a new paradigm.” Adding to the bullish case for gold, physically-backed exchange-traded funds (ETFs) recorded their first inflows in four years, even as overall holdings dipped by 6.8 metric tons, according to the World Gold Council. These inflows highlight renewed investor interest, likely driven by the uncertain macroeconomic environment.

Technical Analysis: Key Levels to Watch

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Gold prices are currently consolidating around $2,659.18, reflecting a cautious market mood. A symmetrical triangle pattern has formed on the 2-hour chart, with immediate resistance at $2,666.39 and support at $2,647.93, aligned with the 50-day EMA. A breakout above $2,666.39 could propel prices toward $2,680.09 and $2,692.76, while a failure to sustain above $2,647.93 could drive a retreat to $2,623.47 or $2,603.30.

The RSI stands near neutral at 50, signaling balanced momentum. A decline below 40 would suggest bearish sentiment, while sustained buying could challenge the upper resistance levels.

Key Takeaways:

• Gold dipped to $2,659.18 after profit-booking, following a four-week high.

• Traders await Friday’s jobs data for clarity on the Fed’s rate strategy.

• Immediate resistance lies at $2,666.39; support is seen at $2,647.93.

Arslan Butt

Index & Commodity Analyst

Arslan Butt serves as the Lead Commodities and Indices Analyst, bringing a wealth of expertise to the field. With an MBA in Behavioral Finance and active progress towards a Ph.D., Arslan possesses a deep understanding of market dynamics.

His professional journey includes a significant role as a senior analyst at a leading brokerage firm, complementing his extensive experience as a market analyst and day trader. Adept in educating others, Arslan has a commendable track record as an instructor and public speaker.

His incisive analyses, particularly within the realms of cryptocurrency and forex markets, are showcased across esteemed financial publications such as ForexCrunch, InsideBitcoins, and EconomyWatch, solidifying his reputation in the financial community.