Gold (XAU/USD) rallied on Thursday after US inflation data came in lower than expected. At that time, XAU/USD was trading around $4,368, breaking out of the week’s previous range. The US Consumer Price Index (CPI) rose 2.7% year-on-year in November, below market expectations of 3.1% and down from 3.0% in September. Core CPI also slowed to 2.6%, below the expected 3.0%, which could affect the Federal Reserve’s potential decisions on monetary policy.

Expectations for Federal Reserve Rate Cuts

There’s growing anticipation of Federal Reserve rate cuts extending into 2026, with US rate futures now pricing in 62 basis points of easing. Additionally, tensions between the US and Venezuela are driving safe-haven flows, which support Gold prices near all-time highs. US labor data showed mixed results; Initial Jobless Claims fell to 224K, slightly below estimates, while Continuing Claims increased to 1.897M, more than the previous 1.83M. The US Dollar Index (DXY) dropped to 98.27 after a brief rise, enhancing Gold’s attractiveness. President Trump is about to announce a new Federal Reserve chairman who favors lower rates. Fed Governor Waller has indicated caution in easing as inflation remains above target. From a technical perspective, XAU/USD has exceeded the $4,350 resistance level and is aiming for the $4,381 record high. The 50-day Simple Moving Average provides support at $4,142, while an overbought RSI indicates strong momentum. The Average Directional Index (ADX) stands at 26.49, supporting a strong market trend. Gold is viewed as a safe haven and a protection against inflation, mainly held by central banks, which saw record buying in 2022. It tends to move inversely with the US Dollar and risky assets. Issues such as geopolitical tensions and interest rates influence Gold’s price, typically leading to rises when rates are lower and the Dollar is weaker. The recent US inflation for November 2025, shown at 2.7%, surprised many by coming in below the expected 3.1%. This reinforces the belief that the Federal Reserve may lean towards easing monetary policy next year. Futures markets reacted immediately, now pricing in over 60 basis points of rate cuts for 2026.

Upcoming Federal Reserve Announcement

The upcoming announcement of a new Federal Reserve Chair is a major unknown factor and could lead to significant market volatility. President Trump has expressed a desire for a leader who supports lower interest rates, indicating a shift toward a looser policy. Derivative traders should prepare for increased implied volatility on gold options as the market adjusts to this new direction. From a technical standpoint, gold has clearly broken through the $4,350 resistance level, setting the stage to test the all-time high near $4,381. However, the Relative Strength Index indicates overbought conditions above 74, suggesting that this strong move might pause temporarily or experience a small pullback. Any decline towards the dynamic support at the 50-day moving average, currently around $4,142, could present a good opportunity for long positions. The weaker US Dollar is benefiting bullion, with the Dollar Index (DXY) currently at about 98.27. This inverse relationship has been consistent, especially when expectations of Fed easing arise, as seen throughout 2024. If the market continues to believe that the Fed will cut rates more aggressively than other central banks, the Dollar will likely stay under pressure, making gold more appealing. We must also consider the support from safe-haven demand, as ongoing geopolitical tensions between the United States and Venezuela continue to rise. This creates a solid price floor and protects against sudden price drops. Central bank buying remains strong, with recent data from November 2025 indicating that emerging market banks have continued to bolster their gold reserves, a trend that is expected to continue. Create your live VT Markets account and start trading now.

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