Gold prices (XAU/USD) surged to their highest level in nearly seven weeks during Wednesday’s Asian session, breaking firmly above the $4,300 level. This rally is primarily fueled by emerging signs of cooling in the previously resilient U.S. labor market, which has dampened the U.S. Dollar and strengthened market convictions that the Federal Reserve will implement further interest rate cuts.

The precious metal, which pays no yield, becomes more attractive in a lower interest rate environment as the opportunity cost of holding it decreases. Recent economic indicators have provided traders with compelling reasons to increase their bullish bets on gold.

Labor Market Shifts and Dollar Dynamics

The catalyst for the latest move was the mixed November employment report. While Nonfarm Payrolls showed a stronger-than-expected addition of 64,000 jobs, critical details beneath the surface painted a softer picture. The Unemployment Rate edged up to 4.6%, and Average Hourly Earnings growth slowed significantly month-over-month, suggesting inflationary pressures from wages may be easing.

This data follows a notably weak U.S. Retail Sales report for October, which was unexpectedly flat. Together, these indicators point to an economy that is finally responding to the Fed’s prolonged period of restrictive monetary policy. As analyzed in a recent Reuters market overview, such a combination of cooling inflation and a moderating labor market is precisely what the Fed needs to justify a policy pivot.

Fed Policy in the Spotlight: Diverging Views and Key Speeches

The Federal Reserve, as reported by Bloomberg, delivered its third consecutive rate cut last week but revealed a divided outlook for 2025. The median projection suggests only one more cut, yet a faction of policymakers sees no further reductions necessary. This divergence puts immense focus on upcoming communications from central bank officials.

Traders are keenly awaiting speeches today from New York Fed President John Williams and Atlanta Fed President Raphael Bostic. Their comments could either reinforce the current dovish market sentiment or trigger a Dollar rebound if they strike a more hawkish tone. Furthermore, political developments are adding an extra layer of uncertainty, with reports from The Wall Street Journal indicating potential interviews for the future Fed Chair position.

Technical Outlook: Bullish Momentum Intact

From a technical perspective, gold’s path of least resistance appears pointed higher. On the four-hour chart, the price is holding decisively above the key 100-day Exponential Moving Average, a widely watched indicator of the medium-term trend. Momentum indicators support the bullish case:

  • The Bollinger Bands® are expanding, indicating increased volatility and strong directional movement.

  • The 14-day Relative Strength Index (RSI) is holding in positive territory above 50, confirming underlying buying pressure without yet signaling an overbought condition.

The immediate upside target is the December 15 high near $4,350. A convincing break above this level could pave the way for a retest of the all-time high at $4,381. On the downside, initial support lies at the December 16 low of $4,271, with a more substantial safety net at the 100-day EMA around $4,220.

The Week’s Inflation Double-Header

All eyes now turn to the final major economic releases of the year, which will be critical in shaping the Fed’s policy path for early 2025. The U.S. Consumer Price Index (CPI) for November, due Thursday, will be followed by the Fed’s preferred inflation gauge, the Core Personal Consumption Expenditures (PCE) Price Index, on Friday. As financial experts at CNBC often note, these reports will be the ultimate test for whether the recent disinflationary trend is sustainable, directly influencing the timing and magnitude of future Fed rate cuts.

Disclaimer: This article is for informational purposes only and does not constitute financial advice. The gold market is volatile, and investors should conduct their own research or consult with a qualified financial advisor before making any investment decisions.