Gold finds support after drop triggered by US Fed rate cuts

Gold prices rebounded from a one-month low to $2,622 before the US session on Thursday. This recovery follows a shift in global risk sentiment after the Federal Reserve's hawkish rate cut. Geopolitical tensions and trade war concerns further fueled the safe-haven demand for gold. However, the US Dollar remained strong, limiting additional gains for the precious metal despite the Fed signalling a slower pace of rate cuts.

Federal Reserve Chair Jerome Powell emphasized caution in future monetary policy adjustments. He highlighted inflation risks and the need to stabilize them within the 2% target range over the next one to two years. Powell assured markets that the labour market remains stable but noted uncertainties in achieving the inflation target. These statements influenced US Treasury yields and supported the Dollar, creating mixed signals for gold traders.

The Federal Reserve's 25-basis-point rate cut was not unanimous, bringing the range to 4.25%-4.50%. Fed officials project only modest rate cuts through 2026, with inflation and growth estimates reflecting cautious optimism. The Fed's core PCE inflation gauge is expected to decline gradually, but gold's appeal waned as traders interpreted the rate cut as hawkish, suggesting limited easing ahead.

Gold prices remain sensitive to key economic data, including Thursday's US GDP figures and the core PCE Price Index. These indicators could influence bullion demand, particularly if they reinforce expectations of a restrictive Fed policy. While safe-haven flows support gold, the strong US Dollar and rising Treasury yields may cap further gains, leaving traders to navigate mixed market signals.

Technical bullish trend for Gold

Gold prices are trading within a rising channel, supported by black trendlines on the chart. The price rebounded after touching the channel's lower boundary at nearly $2,580. The red trendline acts as a secondary support, further strengthening this zone. December trading remains volatile, as highlighted by frequent support and resistance level tests.

The price currently consolidates near $2,620, with the upper dashed trendline serving as a short-term resistance. The recent bounce indicates bullish momentum, but the yellow zone marks uncertainty. Gold may retest the channel's upper boundary if it exceeds the black dotted trendline. A break below the red trend line could invalidate the short-term bullish scenario.

How to trade Gold during volatile market

December has been a challenging and choppy month for gold traders. The chart highlights overlapping price movements, making it difficult to identify clear trends. This volatility often leads to uncertainty, requiring traders to stay cautious. Despite these conditions, gold predictors have effectively navigated the market, showcasing disciplined decision-making.

Over the past 11 months, gold predictors identified key entry points at significant market lows. As shown on the chart, each trade entry coincided with a bottom in gold prices. This strategy resulted in strong profits, reflecting a consistent and well-planned approach. The performance demonstrates the importance of timing and risk management in trading volatile markets like gold.

The chart below shows that December has historically been a positive month over the past few years. However, price action in December has been choppy and overlapping. Since the Fed's decision of a 25-basis-point rate cut aligned with market expectations, there were no surprises, and the market may remain choppy and overlapping. Therefore, traders should exercise caution in December before executing any positions.

Bottom line

Gold prices remain influenced by fundamental and technical factors, creating opportunities and risks for traders. While safe-haven demand and geopolitical tensions support prices, the strong US Dollar and rising Treasury yields limit further upside. December trading continues to exhibit choppy and overlapping patterns, emphasizing the importance of caution and disciplined strategies. Traders should closely monitor key support and resistance levels and upcoming economic data to navigate this volatile market effectively.

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