USD rebound caps gold’s upside momentum
Gold (XAU/USD) remains on the defensive below the $4,200 mark through early European trading on Thursday, although it lacks strong bearish momentum and continues to hold above the weekly swing low. The US Dollar (USD) attempts a modest recovery from its lowest level since late October, reached on Wednesday, acting as a headwind for the precious metal. Additionally, a broadly positive tone across equity markets further undermines demand for safe-haven assets like gold.
However, any meaningful appreciation in the USD appears limited due to growing expectations that the Federal Reserve will lower borrowing costs again next week. This outlook provides some support to the non-yielding gold. Moreover, persistent geopolitical tensions—particularly the prolonged Russia-Ukraine conflict—continue to offer downside protection for the XAU/USD pair. Traders may also prefer to wait for Friday’s key inflation data from the United States before placing fresh directional bets.
On Wednesday, Automatic Data Processing reported that private payrolls unexpectedly declined by 32,000 in November, compared to a revised 47,000 increase in the previous month and well below the expected 5,000 additions. This data suggests a deeper slowdown in the US labor market.
Recent macroeconomic indicators point to a gradual cooling of the United States economy. Combined with dovish remarks from several Federal Reserve officials, this has strengthened market bets for a 25-basis-point rate cut at next week’s FOMC meeting. These expectations continue to act as a tailwind for gold.
Meanwhile, the prospect of lower interest rates supports underlying bullish sentiment in equity markets. A modest uptick in the USD, however, remains a short-term obstacle for gold during Thursday’s Asian session. Still, dovish Fed expectations may cap any significant USD recovery. Investors are likely to await the release of the US Personal Consumption Expenditure (PCE) Price Index on Friday for further clarity on the Fed’s rate path.
Thursday’s US economic docket includes Challenger Job Cuts and Weekly Initial Jobless Claims, which could provide additional trading cues during the North American session. Broader risk sentiment may also generate short-term opportunities.
Geopolitical tensions remain elevated as US Special Envoy Steve Witkoff is scheduled to meet with Ukraine’s National Security Council head, Rustem Umerov, following unsuccessful peace negotiations with Russian President Vladimir Putin. These developments keep geopolitical risks in play and may continue to support gold’s safe-haven appeal.
Gold has repeatedly failed to break above the $4,245–4,250 resistance zone, favoring a bearish bias. However, mixed technical indicators on hourly and daily charts suggest that any further decline is likely to find support near the weekly swing low around $4,164–4,163, last tested on Tuesday.
A decisive break below this zone could open the door to $4,100 and then $4,085, where the 200-period EMA on the 4-hour chart and an ascending trendline from late October converge—forming a strong near-term base.
On the upside, the $4,245–4,250 zone remains a key barrier. A sustained move above this level could target the $4,277–4,278 region and potentially reclaim the psychological $4,300 mark. A breakout above this threshold would signal renewed strength for XAU/USD bulls and pave the way for further gains.