Gold (XAU/USD) Price Forecast: Bullion buoyant above $4,000, now looks for support ahead of ADP payrolls

Trading at $4,008 well into the US session, up +0.14% in today’s trading, gold bullion continues to look for support at the key psychological level of $4,000.

With the US government shutdown still ongoing, US data releases remain sparse.

Eyes now turn to the private release of ADP payrolls this Wednesday, which will likely offer some insight into how the Fed will continue its easing cycle.

Join me as I attempt to answer the $4,008 dollar question:

How will gold (XAU/USD) fare in this week’s trading?

• Cooling after a period of significant upside, gold bullion has found some support at the key psychological level of $4,000, with Thursday’s price action showing a persistent level of bullish interest
  
• Priced in for some time, last week’s rate cut by the FOMC offered a hawkish tilt, with Chair Powell making some suggestion that this could be the final rate cut of the year, which, in theory, would be negative for gold pricing
  
• With the dollar continuing to fresh highs in today’s session, gold has not only become more expensive for international buyers, but the associated rise in short-term bond yields is increasing the opportunity cost of holding gold bullion, hurting pricing

Read Zain’s Asian market wrap-up: Markets Today: Gold in Focus as China Cuts Tax-Break, Asian Factory Orders Slump and FTSE 100 Breaks Trendline

Although I don’t wish to speak too soon, gold pricing is looking relatively stable above $4,000.

Despite the recent downside, which, by most metrics, was entirely inevitable after the explosive rally, gold remains on a firm fundamental and technical footing, with the current consolidation necessary if the yellow metal is to move higher.

With that said, this is market commentary, as in, what’s happening now, so allow me to explain some of the key macroeconomic headwinds currently at play in the precious metal markets.

Let’s discuss.

Hawkish commentary from Fed Chair Powell: Starting with the most significant of the three themes, last week’s interest cut of 25 basis points by the Federal Reserve was met with hawkish commentary from Jerome Powell, citing a need for “data-driven caution”.

These comments come at an interesting time, within the context of a full US government lockdown, where data that the Fed would otherwise rely on to guide its decisions, such as PCE, CPI, and NFP, is entirely unavailable.

The ongoing government shutdown is now only two days shy of being the longest in history, currently at 34 days.

Therefore, considering Powell’s comments, markets have somewhat repriced the probability of a December rate cut from approximately 90% down to 70%, with some surprised at the Fed Chair’s hawkish undertones.

Although markets still overwhelmingly predict rates will be cut in the Fed’s final decision of 2025, the notion that the Federal Reserve is becoming more hawkish directly challenges the current gold rally, with lower interest rates favouring higher bullion prices.

With Stephen Mirran speaking earlier today, notably more dovish amongst his fellow policymakers, markets will continue to refine expectations ahead of December 10th.

Rising dollar and increasing bond yields: Now I’ve set up the premise of a more hawkish Fed than once thought, a further two knock-on effects have been the following:

• A rally in dollar pricing, which now trades at 3-month highs

While it is possible for metals to rally alongside a strengthening dollar, rising USD value makes gold more expensive to buy with non-dollar currencies, hurting international investment.

• Rising short-term bond yields, with the 10YR rising to 4.11%, its highest level since early October

This increases the attractiveness of holding government debt when compared to precious metals, hurting bullion pricing

Put simply, a more hawkish Fed often means higher interest rates, which is inherently bad for gold pricing.

Easing of US-China tensions: To conclude our fundamental analysis for today, it would be remiss not to mention how easing tensions between President Xi and President Trump has effectively removed a significant headwind that was otherwise offering upside to gold pricing.

Following the recent agreement on a tariff truce, the risk premium priced into gold has been significantly reduced, resulting in lower pricing.

As stipulated in my commentary a couple of weeks ago, gold did breach the key psychological level of $4,000 and continued lower to the first resistance level of approximately ~$3,889.

What’s happened since, however, is more a following of the first scenario:

Gold price action will form a base, consolidate, and stage another leg higher, aiming to overcome resistance held at ~$4,240

Technically, gold remains well supported at both $4,000 and $3,889, although a move below the latter could spell trouble for gold pricing, with the next stop being at the 50-period SMA.

To the upside, which bulls will be keen to hear, we can expect our next reasonable price target to be at the 20-period moving average, roughly at $4,090.

Otherwise, our secondary target would be at the previous support-turned-resistance level at $4,240, and then aim to surpass the all-time high of $4,381.

• Price target #1 - 50-period SMA - $4,090
• Price target #2 - Previous support turned resistance - $4,240
• Price target #3 - All-time highs - $4,381
• Support #1 - Key psychological level - $4,000
• Support #2 - Swing low - $3,889
• Support #3 - 50-period SMA - $3,834

Read my most recent coverage on the crude oil markets: WTI Price Forecast: Crude to end week in the red after Tuesday’s sell-off