Gold Holds Ground as Fed Uncertainty and Geopolitical Tensions Keep Quotes Elevated

Gold remains a safe haven play as uncertainty surrounding Federal Reserve policy and stalled peace negotiations continue to support prices. After hitting a seven-week peak of $4,353, XAU/USD has pulled back slightly but continues to hold above $4,300, reflecting the delicate balance between profit-taking and sustained buying interest.

Market Sentiment: Competing Narratives Keep Gold Supported

The precious metal’s resilience remains impressive despite the weekend profit-taking. At $4,302, gold quotes continue to benefit from a combination of dovish Fed signals, weak labor market indicators, and escalating geopolitical risks. While traders booked gains following the strong weekly performance—with the metal up 0.51% by Friday—the underlying support structure suggests further upside potential.

Fed officials’ divergent views have muddied the policy outlook. Kansas City Fed Jeffrey Schmid expressed concern that inflation remains “too hot,” advocating for a more restrictive stance going forward. Meanwhile, Chicago Fed President Austan Goolsbee leaned toward patience, projecting 50 basis points of rate cuts if economic conditions follow his expectations. Philadelphia’s Anna Paulson acknowledged job market weakness but sees inflation moderating through next year as tariff impacts wane, while Cleveland Fed Beth Hammack remains hawkish on inflation and prefers tighter policy.

This cacophony of views creates exactly the kind of uncertainty that benefits gold. With scant economic data available due to government disruptions and the Consumer Price Index delayed, the Fed’s next moves remain opaque. That ambiguity alone keeps gold quotes elevated.

Data Points Reinforcing Gold’s Case

Labor market signals proved weaker than anticipated. Initial jobless claims for the week ending December 6 jumped to 236,000 from 192,000 previously, suggesting cracks in employment resilience. Continuing claims did decline to 1.838 million, hinting at stabilization in longer-term unemployment, but the spike in new filings signals caution.

On the geopolitical front, Russia-Ukraine peace negotiations have stalled, with the White House indicating frustration over the pace of talks. This standoff keeps risk-off sentiment alive, supporting defensive assets like precious metals.

Treasury yields have climbed slightly, with the 10-year note at 4.19%, up four basis points. More critically for gold, real yields—which move inversely to bullion prices—fell to 1.872%, providing a tailwind. The Dollar Index remains flat around 98.35, neither providing significant headwinds nor tailwinds for gold.

Technical Picture: Bulls Pause but Remain in Control

Gold’s uptrend remains intact despite the modest pullback. The Relative Strength Index suggests strong buying momentum, with overbought signals indicating robust underlying demand. If XAU/USD breaks above Friday’s high of $4,353, the all-time record of $4,381 comes into play, with further targets at $4,400, $4,450, and $4,500.

Support levels to monitor: If gold quotes fall below the December 11 high of $4,285, watch for additional selling pressure toward $4,250 and $4,200. The technicals remain bullish-biased, suggesting bulls are merely catching their breath rather than capitulating.

Gold remains a compelling positioning tool in an environment of policy uncertainty and geopolitical friction.