XAU/USD. Analysis and Forecast

[Ben Graham]

On Tuesday during the North American session, gold partially gave up some of its intraday gains as the U.S. dollar showed a moderate pullback following mixed U.S. economic data. At the time of writing, XAU/USD is trading near $4,457, slightly below the new all-time high of $4,497.

Nevertheless, the decline in the precious metal remains limited, as ongoing geopolitical tensions continue to support strong demand for safe-haven assets. In addition, expectations that the Federal Reserve will cut interest rates in 2026 are providing additional support to gold prices.

The latest stage of growth also reflects year-end portfolio rebalancing as markets enter a prolonged holiday period. While profit-taking at current levels may lead to short-term consolidation, the overall trend remains positive, with gold heading toward its strongest annual gain since 1979, having risen nearly 70% since the beginning of the year.

The U.S. Dollar Index (DXY), which measures the dollar against a basket of six major currencies, is holding near the round level of 98.00, recovering at a moderate pace after falling to an intraday low around 97.85–97.82. Against the backdrop of persistent geopolitical tensions between the United States and Venezuela, the situation remains strained: President Donald Trump has imposed a blockade on sanctioned oil tankers entering and leaving Venezuela. Earlier this month, U.S. authorities seized two oil vessels linked to Venezuela, including one over the weekend.In addition to geopolitical risks, markets are expecting two interest rate cuts in 2026, although policymakers' views remain divided following the announcement of a cumulative 75-basis-point rate reduction. On Monday, Fed Chair Steven Miran noted that current economic data could push toward a more accommodative monetary policy, warning of potential recession risks if policy is not eased. At the same time, Cleveland Fed President Beth Hammack said in an interview with The Wall Street Journal on Sunday that she sees no need to cut rates in the coming months, as inflation risks persist, and rates are expected to remain in the 3.50%–3.75% range until spring.

A leadership transition at the Federal Reserve also plays an important role, as Chair Jerome Powell's term will end in May 2026. U.S. President Donald Trump has repeatedly stated his preference for a Fed chair who would favor lower interest rates. According to CNBC, anonymous sources suggest that a decision on the nominee could be announced as early as the first week of January. So far, Trump has already interviewed Fed Governor Christopher Waller, while other potential candidates include National Economic Council Director Kevin Hassett and former Fed Governor Kevin Warsh.

Thus, based on the above, the fundamental backdrop suggests continued upward potential for gold.

From a technical perspective, the Relative Strength Index (RSI) stands at 81, deep in overbought territory, which could limit short-term gains and lead to price consolidation. Prices have found support near the $4,430 level, which corresponds to the 14-period EMA on the 4-hour chart.

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