Gold technical outlook amid Fed policy and geopolitical uncertainty

Gold prices remain range-bound between $2500 and $2700 zones in December. The US Dollar's retreat from a two-year high acts as a tailwind, alongside geopolitical risks from the Russia-Ukraine war and Middle East tensions. However, the Federal Reserve's hawkish stance on slowing rate cuts in 2025 offset these supportive factors. This sustains elevated US Treasury yields and caps gold's upside. The market awaits a stronger buying momentum before gold can sustain further gains.

Despite inflation showing signs of moderation, the Fed's policy continues to weigh on gold. The US Personal Consumption Expenditure (PCE) Price Index increased to 2.4% annually, while core PCE matched expectations at 2.8%. Slower Personal Income growth and modest Consumer Spending reflect cautious economic activity, keeping investors on alert. Meanwhile, geopolitical uncertainties, including Putin's threat of retaliation against Ukraine and escalated violence in Gaza, bolster safe-haven demand for gold. However, they fail to drive significant price movement. Traders watch the Conference Board's Consumer Confidence Index for short-term direction. Elevated bond yields and a positive equity market sentiment further limit gold’s appeal as a non-yielding asset.

Gold technical outlook

The gold chart below shows that the gold price moves within a range, struggling to break above resistance at approximately $2,632. It forms a bullish double-bottom pattern, suggesting potential upward momentum. The Relative Strength Index (RSI) is near 66, indicating moderate bullish strength but not overbought. The price consolidates above the pattern's neckline, signalling a possible upward trend continuation if resistance breaks.

This double bottom in the gold market formed after a strong price drop following the Fed rate cuts and a strong rebound after the US PCE data. Since gold prices are expected to remain sideways due to thin liquidity during the holidays, the market continues to trade within a range-bound pattern.

Bottom line

In conclusion, gold prices remain confined within a range as mixed factors shape the market outlook. Geopolitical risks and the US Dollar's retreat provide support, while the Federal Reserve's hawkish stance and elevated bond yields limit gains. The formation of a bullish double-bottom pattern hints at potential upward momentum, but thin holiday liquidity and cautious economic conditions keep prices range-bound. Traders should watch key economic data and monitor resistance levels for clearer directional cues.

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