Gold prices (XAU/USD) held a strong bid during early European trading on Wednesday, moving closer to a one-and-a-half-week high. Multiple factors are supporting this upward trend as investors anticipate further Federal Reserve interest rate cuts in 2025 amid easing inflation and a weak US economic outlook.
Factors Driving Gold’s Rise
The US dollar weakened to a two-week low, pressured by concerns over the US fiscal situation and a recent downgrade of the US government’s sovereign credit rating. This decline in the dollar has benefited gold, making it more attractive as an alternative asset.
Additionally, renewed US-China trade tensions and ongoing geopolitical risks have pushed investors toward safer assets like gold. The recent breakout above the $3,250-$3,255 resistance zone also triggered technical buying, adding momentum to the price rally.
Technical Outlook: Next Resistance and Support Levels
From a technical standpoint, gold’s sustained breakout above the $3,250-$3,260 range, coinciding with the 200-period Simple Moving Average (SMA) on the 4-hour chart, signals strong bullish momentum. The move above the $3,300 level, coupled with positive indicators on hourly and daily charts, supports a continued upward trend.
Gold bulls are now likely to target the next key resistance near the $3,360-$3,365 zone. Should momentum persist, prices may extend further to challenge the $3,400 round number.
On the downside, a drop below the Asian session low around $3,285 could attract buyers back near the $3,250-$3,260 zone, which has now turned into support. However, if prices fall below this support, technical selling may push gold down to the $3,200 level. Further declines could test the $3,178-$3,177 support range and potentially extend toward last week’s swing low near $3,120. The next major support is around $3,100.
In the absence of major US economic data, gold’s three-day weekly rally looks set to continue, supported by easing inflation expectations, geopolitical uncertainties, and technical factors. Traders should watch for a decisive move above $3,365 for confirmation of further gains, while a break below $3,285 could signal a short-term pullback.
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