Gold price rose in Thursday’s trading session as markets reacted to the Fed’s quarter percentage point interest rate cut. XAUUSD traded at $2,618 at the spot market, up by 1.2 percent in the intraday trading session. Traders are also watching the geopolitical space for hints on possible shifts in the trajectory of the demand for the yellow metal.
Fed rate decision propels gold price higher- but it might not last
The Federal Open Market Committee’s last interest rate change before Donald Trump gets into office was described as a “closer” call by Fed Chairman, Jerome Powell. That underlines the central bank’s delicate balance between keeping the economy on a growth path and reining on inflation.
US interest rates will now be in the 4.25%-4.50% bracket, with the Fed having slashed the rates by a full percentage point since September. However, inflation remains sticky, with consumer prices having risen by 2.7% YoY in November- well above the Fed’s target of 2%.
Gold prices will certainly be spurred by lower interest rates in the near-term. However, the Trump administration’s economic policies are expected to be largely inflationary. Particularly, trade tariffs could make imports more expensive. Also, they could potentially disrupt US exports due to retaliatory measures taken by affected countries like China, Canada and Mexico.
China and geopolitical factors to weigh in
Beyond the US economic sphere, China’s return to the gold market in November also provides clues. The country’s central bank bought 160,000 ounces of gold last month, its first purchase after a six-month hiatus. Its willingness to buy the commodity at elevated prices signals a potential continuation of the pattern, which could add fuel to gold price.
Meanwhile, Israel’s Golan Heights expansion plans and the Russia-Ukraine war could also play a significant role. Safe haven gold typically performs better in times of geopolitical crisis.
Gold price prediction
Gold price pivots at $2,607 and the upside will prevail if the buyers keep the price above that level. The first resistance is likely to come at $2,622. However, a stronger momentum will breach that barrier and could potentially test the next reistance at $2,638.
Conversely, the sellers will take control if the price breaks below the pivot. In that case, XAUUSD will likely find initial support at $2,596. The upside narrative will be invalid if the price breaks below that level. Also, extended control by the sellers could take the price lower and test the second support at $2,584.
