XAU/USD. Price Analysis. Forecast. Gold Surges Above $4,100 Amid Rate Cut Expectations

[Ben Graham]

On Monday, the price of gold surged sharply, breaking through the $4,110 level, driven by investors' confident expectations of a potential rate cut by the Federal Reserve at the December meeting, considering the ongoing stream of economic data from the U.S.

The recovery of the yellow metal has continued for the fourth consecutive day while remaining in a narrow range alongside the decline in U.S. Treasury yields. Soft statements from Fed officials have increased the likelihood of a 25-basis-point rate cut in December.

Fed Chair Christopher Waller supported a rate cut in December, echoing comments by John Williams, president of the Federal Reserve Bank of New York, last Friday, who said a cut was necessary due to the weakening labor market. Last week, Williams stated that a possible rate cut would occur "in the near future," increasing the likelihood of a December cut.

Although the U.S. dollar remains strong, gold prices continue to rise amid falling U.S. Treasury yields and speculation about low interest rates. According to the FedWatch Tool, the likelihood of a rate cut in December is currently estimated at 76%.

While the geopolitical situation seems to have stabilized amid joint U.S. and Ukrainian efforts to prepare a plan to end the conflict with Russia, gold prices have so far shown little reaction to this news. The 28-point plan developed by the White House and the Kremlin is considered more favorable for Russia.

This week, important economic reports are expected from the U.S.: on Tuesday, data on ADP employment over the last four weeks will be released, alongside the Producer Price Index and retail sales volumes. On Wednesday, data on durable goods orders and initial claims for unemployment benefits may be published, which could provide insights into further actions by the Fed and speeches from Fed officials.

From a technical perspective, the indicators, including the 20-day and 50-day simple moving averages (SMAs), remain unchanged, with the 20-day SMA serving as the first support level at $4,045. The subsequent levels are $4,020, the round level of $4,000, and $3,989, where the 50-day simple moving average (SMA) is situated.

The oscillators on the daily chart are positive, confirming a positive outlook for the yellow metal.

The resistance levels for the XAU/USD pair remain in the $4,150-$4,145 zone, as well as the November high around $4,245, recorded on November 13.

The material has been provided by InstaForex Company - www.instaforex.com