Gold (XAU/USD) trades slightly softer on Wednesday as investors adopt a cautious stance ahead of the upcoming US economic data releases due later in the day. At the time of writing, XAU/USD is consolidating around the $4,200 psychological mark after easing from an intraday high near $4,228.
The US calendar brings ADP Employment Change and the ISM Services Purchasing Managers Index (PMI), both of which could help shape market expectations ahead of next week’s Federal Reserve (Fed) monetary policy meeting.
ADP will be watched closely as a read on labour conditions, especially with October’s Nonfarm Payrolls (NFP) set to be released together with the November report on December 16, leaving policymakers with few data points to assess labour conditions ahead of the decision.
However, markets already price in about an 87% chance of a 25 basis point (bps) reduction, keeping the US Dollar (USD) on the back foot and offering a broadly supportive backdrop for Gold.
Elsewhere, geopolitical tensions remain elevated after US envoys’ talks with Moscow on the Ukraine conflict failed to deliver meaningful progress.
Market movers: Dovish Fed signals and central bank demand keep Gold bid
- US President Donald Trump said on Tuesday that he will announce his nominee for the next Fed Chair in early 2026. This follows his comment on Sunday, “I know who I am going to pick, yeah. We’ll be announcing it.” NEC Director Kevin Hassett has emerged as a leading contender, and markets view his potential appointment as paving the way for a more dovish policy stance.
- Dovish Fed expectations remain a drag on the US Dollar. The US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, is hovering near its lowest level since October 30, around 98.99 and marking a seventh consecutive day of declines.
- US envoy Steve Witkoff met Russian President Vladimir Putin in Moscow on Tuesday to discuss US proposals to end the war in Ukraine, but the meeting ended without any breakthrough. Putin’s foreign policy advisor, Yuri Ushakov, described the talks as “constructive and very informative,” though he admitted that “a compromise hasn’t been reached yet” on key territorial issues. He added that discussions would continue.
- According to a World Gold Council (WGC) report published on December 2, central banks ramped up gold purchases in October, adding a net 53 tonnes, the largest monthly increase so far this year and 36% higher than September.
Technical analysis: XAU/USD stalls near 21 SMA as momentum softens
In the 4-hour chart, the 21-period Simple Moving Average (SMA) rises above the 100-period SMA, preserving a broader bullish structure. Price sits beneath the 21 SMA at $4,212.44 while holding above the 100 SMA at $4,134.37, keeping the near-term tone mixed. The 14-period Relative Strength Index (RSI) stands at 52.84, neutral, after cooling from overbought territory.
Momentum has softened, with the 14-period Average Directional Index easing to 18.29, pointing to limited trend strength. A decisive move above the 21 SMA would reenergize the upside and put buyers back in control, while failure to regain that level could keep XAU/USD capped and risk a drift toward dynamic support, with the rising 100 SMA underpinning the broader uptrend.
(The technical analysis of this story was written with the help of an AI tool)
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
Source: https://www.fxstreet.com/news/gold-holds-steady-ahead-of-key-us-data-releases-202512031146
