Gold (XAU/USD) retreats from its record highs but remains comfortably above $2,900 during the Asian session on Wednesday. A generally positive risk sentiment has led to some profit-taking in the safe-haven metal as traders reposition ahead of the Federal Open Market Committee (FOMC) meeting minutes. Investors are seeking further clarity on the Federal Reserve’s rate-cut trajectory, which will influence the US Dollar (USD) and, in turn, impact gold prices.
Market Sentiment and Fed Policy Expectations Support Gold
Despite some retracement, expectations of further Fed rate cuts continue to weigh on the USD, providing support for gold. Uncertainty surrounding former US President Donald Trump’s proposed tariffs, which could spark a global trade conflict, further limits any significant downturn in gold prices. As a result, traders remain cautious about confirming a peak in XAU/USD without further downside momentum.
The delay in implementing Trump’s reciprocal tariffs and ongoing diplomatic efforts to end the Russia-Ukraine war have contributed to the latest profit-taking in gold. However, concerns over escalating trade tensions and growing expectations of Fed policy easing continue to bolster the metal’s appeal.
Weak US retail sales data and mixed inflation signals have fueled speculation that the Fed may cut rates as early as September or October. Fed Funds Futures suggest a possible 40 basis point rate cut by year-end, restraining the USD’s recovery from a two-month low and further supporting gold prices. Meanwhile, San Francisco Fed President Mary Daly emphasized on Tuesday that interest rates should remain steady until clearer progress is made toward the 2% inflation target. Investors now await the Fed’s January meeting minutes for insights into the central bank’s policy direction and its impact on gold.
Technical Outlook: Bulls Eye Breakout While Key Support Holds
From a technical standpoint, gold’s current range-bound movement suggests a bullish consolidation following its recent surge to record highs. However, the daily Relative Strength Index (RSI) remains near overbought territory, indicating a potential continuation of the consolidation phase.
Gold is likely to find support at $2,925, with stronger footing around the $2,900 level and the $2,878-$2,876 range. A decisive drop below these levels could push prices toward $2,860-$2,855, with further downside potential to $2,834 and $2,815, eventually testing the $2,800 mark.
On the upside, resistance remains at $2,940-$2,942, close to this month’s record high. A breakout above this barrier could trigger fresh buying, reinforcing the bullish trend and paving the way for continued gains in the coming weeks.
