Gold prices have hit a seven-week high, approaching $4,350. This rise stems from expectations that the US Federal Reserve will cut interest rates. Lower rates can reduce the cost of holding gold, making it more attractive, especially during times of global uncertainty when it acts as a safe haven. However, strong comments from Fed officials may strengthen the US Dollar, which could negatively impact gold prices. Traders are closely watching speeches from important Fed officials, as well as US employment reports for October and November. These reports include Nonfarm Payrolls and the Unemployment Rate, which could give clues about the labor market and influence predictions for the Fed’s January meeting. A recent mass shooting in Sydney, which resulted in at least 16 deaths and was labeled a “targeted attack” by Australia’s Prime Minister, has also added to market concerns.

The Federal Reserve’s Decision

The Federal Reserve recently cut rates by a quarter-point, setting a target range of 3.50% to 3.75%. Market analysis indicates a 76% chance that the Fed will keep rates steady until January 2026, according to the CME FedWatch tool. Gold’s outlook remains positive, supported by its price being above the 100-day Exponential Moving Average and a strong 14-day Relative Strength Index. Resistance is seen around $4,355, while initial support is around $4,257. Following the Fed’s rate cut in December 2025, gold has been reacting favorably to the lower interest rate setting. However, Fed Chair Powell’s suggestion of a pause leaves some uncertainty. The tragic events in Sydney are also increasing gold’s appeal as a safe-haven asset. The main factor influencing gold prices is interest rates. Lower rates reduce the opportunity cost of holding gold, a trend seen in past rate-cutting cycles, like in 2019 when gold prices increased by over 20%. Central banks have been strong buyers, adding a record 1,136 tonnes in 2022 and continuing to purchase aggressively into 2025, providing solid support for gold prices.

US Employment Report Forecast

This week, attention is focused on the US employment report for November. Economists predict Nonfarm Payrolls will be around 170,000. A significant deviation from this estimate could lead to major market fluctuations. If the number is much lower, it could strengthen expectations for further rate cuts in 2026, pushing gold closer to its all-time high of $4,381. Conversely, a much stronger report might boost the dollar and cause a rapid decline in gold prices. For derivative traders, anticipating volatility around Tuesday’s jobs data could be a smart strategy. Buying options, like calls targeting $4,381 resistance or puts near the $4,257 support level, may help take advantage of large price movements. The widening Bollinger Bands in technical analysis suggest a significant price shift is likely. However, there is also a risk that the Fed could take a hawkish stance in the new year. The latest Consumer Price Index (CPI) for November 2025 showed inflation at 3.1%, still above the Fed’s 2% target. This persistent inflation leads markets to factor in a 76% chance that rates will remain unchanged in January 2026, possibly limiting gold’s immediate rally. As such, any declines in gold’s price after strong economic data may present a buying opportunity for those looking to invest long-term. The overall trend appears positive as we head into 2026, with the Fed having completed its rate cuts for 2025. Traders can consider pullbacks as chances to establish positions that benefit from a shift toward looser monetary policy. Create your live VT Markets account and start trading now.

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