XAU/USD. Analysis and Forecast

[Ben Graham]

Today, gold bounced off a level slightly above the round $4,200, accelerating its upward momentum.

Yesterday, as expected, the U.S. Federal Reserve cut the interest rate by 25 basis points following a two-day meeting and projected only one possible rate cut in 2026. However, investors expect two more cuts next year, especially after the dovish comments from Fed Chair Jerome Powell.

At the post-meeting press conference, Powell noted that the U.S. labor market faces significant downside risks and that the central bank does not want its economic-tightening policies to hinder job creation. This comment weakened the U.S. dollar and helped gold reach a new weekly high.

Nevertheless, the Fed Chair refrained from giving specific forecasts regarding the timing of future rate cuts but hinted that upcoming reductions are likely to be more restrictive. Moreover, two hawkish members of the Federal Open Market Committee opposed yesterday's rate cut, adding uncertainty about the pace of future policy easing and acting as a restraint on precious metal prices at yesterday's session.

However, today the U.S. Department of Labor reported that initial jobless claims for the week ending December 6 rose to 236,000, compared to the revised 192,000 in the previous week. These numbers increased pressure on the dollar, causing it to plunge, and created favorable conditions for gold's rise.

In addition, slow progress in ceasefire negotiations between Russia and Ukraine continues to fuel geopolitical uncertainty, affecting global markets and supporting safe-haven assets such as gold.

From a technical standpoint, positive oscillators on the daily chart suggest that any pullback toward the round $4,200 level can be viewed as a buying opportunity.

A strong rally beyond $4,250 and consolidation above $4,270 would push the price toward the round $4,300 level. Further buying could be considered a key factor for the bulls. However, it is worth noting that the Relative Strength Index is approaching overbought territory, which confirms the likelihood of a correction.

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