Gold Has Pulled Back From Highs—But For How Long?

[Ben Graham]

Gold prices rose again today and are near their historic highs, as traders prepare to assess US data that could confirm the need for a Federal Reserve rate cut.

Gold prices exceeded $3,643 per ounce after peaking above $3,674 on Tuesday, when a preliminary data revision showed that the number of employed workers is likely to be revised downward by a record 911,000. The Fed will set monetary policy next week after the publication of US producer and consumer inflation data on Wednesday and Thursday, which will also influence its decision.

Weak economic indicators in recent months—particularly slowing GDP growth and a decline in employment gains—have increased expectations that the Fed will be forced to ease monetary policy. Lower interest rates are traditionally favorable for gold since they make dollar assets less attractive and reduce the opportunity cost of holding the non-interest-bearing metal.

However, despite growing expectations for policy easing, some analysts urge caution. Inflation, though slowing, remains above the Fed's target, and premature rate cuts could lead to renewed acceleration. Thus, the Fed's decisions will depend on a comprehensive assessment of the macroeconomic situation and, in particular, on the inflation data to be published in the coming days.

The influence of geopolitical tensions also cannot be underestimated. Yesterday, President Donald Trump told European officials that he is ready to impose new tariffs against India and China to pressure President Vladimir Putin to the negotiating table with Ukraine—but only if EU countries follow his example. Additionally, on Tuesday, Israel carried out an unprecedented military strike against senior Hamas leaders in Doha.

This year, gold bullion prices have increased by nearly 40% thanks to central bank purchases, geopolitical uncertainty, and concerns over the impact of US tariff policy on the global economy. Inflows into gold-backed ETFs have provided additional support, and many banks, including Goldman Sachs Group Inc., predict further price increases amid expectations of a Fed rate cut.

In recent days, several central banks have signaled ongoing interest in gold bullion, indicating continued public sector buying. This week, Czech authorities stated that reserve volumes reached record highs following data from the People's Bank of China showing growth. The Reserve Bank of India has also increased its purchases.

As for the current technical setup for gold, buyers need to overcome the nearest resistance at $3,658. This will allow a move toward $3,682, above which breaking through will be quite difficult. The most distant target will be the area of $3,720. In the event of a decline, bears will try to take control of $3,600. If they succeed, a break of this range will deal a serious blow to the bulls' positions and push gold down to a low of $3,562 with the prospect of reaching $3,526.

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