- Summary:
- Gold price has supportive fundamentals on multiple fronts, thanks to geopolitical instability and a looming Fed interest rate cut.
Gold price rose for the third successive session on Tuesday as traders bet on likely Fed interest rate cuts and reacted to a positive demand-side outlook. The yellow metal traded at $2,676 per ounce at the spot market, up by 0.5% on the daily chart. That market the first successive three-day gain for XAUUSD in December, a week before the Federal Reserve announces an expected 25 basis points cut on the cost of borrowing.
Fed Rate Cut and Safe Haven Demand Drive Gold Price Up
The Fed will meet on December 17-18, and recent US macroeconomic data has added support to the consensus forecasts of a third rate slash of the year. That has added to the upward momentum brought to gold price following China’s move to resume purchases of the precious metal.
Meanwhile, rising geopolitical uncertainty in Europe and Asia have added safe haven support to gold price. Freench President Emmanuel Macron is struggling to form a new government after the previous coalition fell apart.
Elsewhere, South Korea faces political turmoil after last week’s unsuccessful attempt at impeaching the President following a foiled move to establish martial law. These have added to the long-running Russia-Ukraine conflict and the emerging crisis in Syria following Bashar Al Assad’s ouster this week. The sum of these conflicts is a toxic business environment that could increase gold demand and help spur prices.
Gold price forecast
The momentum on gold price calls for further upside above the pivot mark at $2,670. With the buyers in control, the commodity will likely move higher, but could encounter the first resistance at $2,680. However, if the momentum strengthens, the XAUUSD pair could break above that level and test 2,688.
On the downside, a move below $2,670 will swing the momentum to the downside. With that, initial support is likely to come at $2,660. Breaking below that level will invalidate the upside narrative. Also, the momentum could take gold price lower and test the second support at $2,650.
