Gold Price Holds Ground as Policy Ambiguity and Geopolitical Tensions Support Bullion Recovery

Gold (XAU/USD) is consolidating near $4,302 on Friday following a robust weekly performance that saw the precious metal touch $4,353—its highest level in seven weeks. While profit-taking has tempered momentum, bullion remains underpinned by a combination of Federal Reserve policy signals and escalating international tensions.

Fed Policy Divergence Creates Uncertainty Favoring Safe Havens

The week witnessed conflicting messages from central bank officials regarding inflation and the appropriate policy stance. Kansas City Fed Jeffrey Schmid and Chicago Fed President Austan Goolsbee both dissented from recent rate decisions, though their reasoning diverged significantly.

Schmid advocated for a more restrictive approach, arguing that current inflation remains “too hot” relative to the Fed’s objectives. He characterized the economy as maintaining forward momentum while price pressures persist above target levels. Conversely, Goolsbee preferred a cautious stance pending clearer inflation and labor market signals, though he projected 50 basis points of rate cuts should economic conditions evolve as anticipated.

Philadelphia Fed President Anna Paulson highlighted labor market softness while expressing optimism that tariff-related price pressures—the primary driver of 2024’s inflation surge—would moderate through next year. Cleveland Fed Beth Hammack remained laser-focused on inflation dynamics, contending that the current policy rate approximates neutral territory and preferring a more contractionary stance.

This policy cacophony reflects genuine uncertainty about the inflation trajectory, particularly as economic data faces distortions from the recent government shutdown. The scarce Consumer Price Index readings have complicated Fed communications ahead of 2025.

Economic Data Sends Mixed Signals

The labor market delivered conflicting signals this week. Initial jobless claims rose sharply to 236,000 for the week ending December 6, up from a revised 192,000 in the prior week—the largest single-week jump in recent periods. However, continuing claims declined to 1.838 million from 1.937 million, suggesting modest stabilization in longer-term unemployment dynamics.

US Treasury yields have climbed, with the 10-year note rising four basis points to 4.19%. Real yields—which move inversely with gold valuations—have contracted by approximately 2.5 basis points to 1.872%, providing technical support for bullion. Meanwhile, the Dollar Index remains anchored near 98.35, offering no significant headwind to precious metal valuations.

Geopolitical Headwinds Persist

Russia-Ukraine peace negotiations have stalled, adding another layer of support for gold’s safe-haven appeal. Diplomatic delays and disagreements over proposed frameworks continue to elevate tail risks that typically benefit defensive assets.

Technical Setup: Momentum Intact Despite Pullback

From a technical perspective, gold maintains an uptrend structure. The Relative Strength Index signals sustained buying pressure while entering overbought conditions, indicating robust demand persists despite the intraday pullback.

Breaking above the week’s high of $4,353 would clear the path toward the all-time high near $4,381. Surpassing that threshold opens doors to $4,400, $4,450, and ultimately $4,500. On the downside, weakness below the December 11 high of $4,285 could prompt a retest of $4,250, with further support materializing around $4,200.

The gold price technical analysis remains constructive as long as real yields remain under pressure and geopolitical uncertainty persists.