XAU/USD Sustains Recovery Momentum as Safe-Haven Demand Counters Selling Pressure

Technical Setup Shows Gold Poised for Higher Levels

Gold (XAU/USD) is displaying constructive price action on Tuesday, trading above the critical 100-day Exponential Moving Average. The widening Bollinger Bands suggest volatility is picking up, setting the stage for potential breakout moves. The Relative Strength Index hovering near midline indicates market participants remain undecided on direction, though the overall posture remains constructive. Immediate resistance emerges at the $4,520 Bollinger Band ceiling, with a decisive breach potentially paving the way toward the all-time high of $4,550 and the psychological $4,600 barrier.

What Triggered Monday’s Sharp Decline

The precious metal suffered its worst single-day performance since October, tumbling 4.5% during the previous session. The Chicago Mercantile Exchange Group’s decision to raise margin requirements on gold and silver futures contracts sparked aggressive profit-taking and portfolio rebalancing across the commodities complex. This forced selling temporarily overwhelmed the asset’s safe-haven appeal, pushing prices below critical support levels before the recovery began.

Rate Cut Expectations Provide Downside Protection

Looking ahead to 2026, financial markets are increasingly pricing in multiple Federal Reserve rate cuts, with current expectations suggesting approximately 16.1% probability of an easing move as early as January. Lower interest rates would diminish the opportunity cost of holding non-yielding assets like gold, providing fundamental support for the yellow metal. Additionally, geopolitical tensions between Russia and Ukraine continue to fuel safe-haven inflows into traditional stores of value.

Market Backdrop Remains Supportive Despite Holiday Thinness

Trading volumes are expected to remain subdued as year-end holidays approach, potentially limiting the scale of any sustained moves. However, the release of Federal Open Market Committee minutes scheduled for Tuesday could inject fresh volatility and direction into the market. On the support side, the $4,305-$4,300 zone—coinciding with December 29’s low—represents the initial floor, with further weakness potentially targeting the December 16 low of $4,271.

Data Points Supporting the Bullish Case

Recent economic data adds nuance to the Fed’s inflation trajectory. US Pending Home Sales jumped 3.3% month-over-month in November, exceeding expectations of 1.0% and marking the highest reading since February 2023. This resilience in the real estate sector could influence Fed policymakers’ calculations regarding future rate adjustments. Meanwhile, commentary from political leadership regarding Federal Reserve independence continues to introduce uncertainty into the policy outlook.