FX.co ★ XAU/USD, GOLD

Gold prices have surged for the third consecutive day, defying a stronger US dollar, as investors seek refuge in safe-haven assets amid growing economic uncertainty. The precious metal has rallied over 3.4% this week, with its sights set on the $2,700 level. Currently trading at $2,650, XAU/USD has seen a significant uptick, driven by concerns over potential inflationary pressures and the Federal Reserve's monetary policy stance. The recent rise in gold prices can be attributed to several factors. Firstly, investors are worried that certain policies implemented by the current administration could exacerbate inflationary pressures, leading to higher US Treasury yields and a stronger dollar. This would ultimately erode the value of dollar-denominated assets, including gold. However, the recent strength in the dollar has not deterred gold buyers, suggesting that safe-haven demand is outweighing currency concerns. Secondly, uncertainty surrounding the Federal Reserve's future monetary policy has also contributed to gold's uptrend. While Fed officials have expressed confidence in bringing inflation down to the 2% target, there remains divergence of opinion regarding the appropriate policy response. Some officials advocate for cautious rate cuts, while others argue for maintaining a more restrictive stance. This uncertainty has fueled speculation about a potential rate cut in the upcoming December meeting, which would benefit non-interest-bearing assets like gold.

From a technical perspective, gold prices have rebounded strongly this week but are still struggling to break above their 55-day moving average, currently situated at 2627.547. The recent price action, following the peak at 2789.92, is seen as a correction within the broader five-wave rally that commenced at 1810.26. A failure to breach the 55-day moving average could extend the decline to the 38.2% Fibonacci retracement level of the 1810.26 to 2789.92 rally, which lies at 2415.68. However, sustained trading above the 55-day moving average could lead to a retest of the recent highs at 2789.92 and potentially initiate the third phase of the corrective pattern. While gold has shown remarkable resilience in the face of a stronger dollar, the outlook for the precious metal remains uncertain. Investors will be closely monitoring developments in the US economy, the Federal Reserve's policy decisions, and global geopolitical events that could influence gold's direction in the coming months.