Yellow Metal Finds Footing as Investors Eye Lower Rates and Global Risks

XAU/USD inches back above $4,350 as safe-haven demand provides price support

Gold has started the week on a recovery path, climbing back into positive territory during Tuesday’s Asian trading hours. After suffering its worst single day in months with a 4.5% plunge, the precious metal is now steadying above the $4,350 mark. While elevated collateral requirements forced margin call liquidations earlier, market conditions are shifting as traders recalibrate positions heading into the New Year.

What’s Driving the Rebound?

The outlook for Federal Reserve policy next year is becoming a key catalyst. Market participants are increasingly confident that interest rate cuts will materialize in 2026, which naturally benefits non-yielding assets like Gold. Lower borrowing costs reduce the opportunity cost of holding the yellow metal, making it more attractive relative to interest-bearing alternatives.

Beyond monetary policy, the broader geopolitical landscape remains unsettled. Fresh tensions between Russia and Ukraine—with Moscow accusing Kyiv of a drone attack on the presidential compound—are reigniting safe-haven flows into traditional defensive assets. These conflicting narratives around peace negotiations continue to remind investors why they need ballast positions in their portfolios.

The Chicago Mercantile Exchange Group’s decision to raise collateral requirements on precious metals futures over the weekend acted as a pressure point. However, this technical adjustment appears to have run its course as liquidations ease and natural demand returns.

Market Pulse: Key Developments

• Housing momentum: US Pending Home Sales surprised to the upside, rising 3.3% month-over-month in November versus expectations of just 1.0%, hitting the highest reading since early 2023.
• Central bank commentary: Trump’s recent remarks about expecting the next Fed Chair to maintain accommodative policy have reignited debate about institutional independence, adding to market uncertainty.
• Rate cut odds: The CME FedWatch tool is now pricing an approximately 16.1% probability of a rate cut at January’s FOMC meeting.
• Geopolitical escalation: Conflicting reports between Russia and Ukraine regarding alleged drone strikes continue to create headlines and support risk-off sentiment.

Technical Picture: Consolidation Phase Ahead

From a technical standpoint, Gold maintains its constructive setup with price trading above the 100-day exponential moving average on the daily timeframe. The Bollinger Bands are expanding, suggesting volatility may be picking up. However, the 14-day Relative Strength Index is hovering near neutral territory, signaling that momentum is balanced between buyers and sellers in the short run.

Resistance traders should monitor sits at the upper Bollinger Band around $4,520. A clear break above this zone could pave the way toward retesting the all-time high near $4,550 and the psychological $4,600 level.

On the downside, initial support forms in the $4,305-$4,300 band, coinciding with last week’s low. Should selling pressure intensify below this floor, targets could extend lower toward the $4,271 level established on December 16.

Trading volumes are expected to remain subdued until after the holiday break, meaning moves could be choppy on smaller participation. The FOMC Minutes due later today may provide fresh direction, but most major players are likely in a holding pattern until January activity resumes.