Following the ECB’s decision last week to leave interest rates unchanged, traders will closely monitor this week’s monetary policy announcements from the US Federal Reserve, the Bank of England, the Bank of Japan, and other central banks from Toronto to Taipei.

As the XAU/USD chart shows today, the gold price has stabilised after its recent record highs, with investors adopting a wait-and-see stance. The ADX indicator is trending lower, suggesting a diminishing directional momentum.

Key Drivers Influencing Gold Prices

Market participants are almost fully convinced that the Federal Reserve will cut rates by a quarter point this week, while also pricing in the likelihood of further reductions next year amid signs of labour market weakness. Lower rates are generally seen as supportive for gold, making it a more attractive asset relative to yield-bearing US Treasuries.

Additional factors underpinning bullish sentiment include:
→ Weakness in the US dollar.
→ Persistent geopolitical tensions.
→ Pressure on the Fed from Donald Trump, who recently attempted to dismiss Board Governor Lisa Cook.
→ Central bank gold purchases.

On the other hand, profit-taking could dampen demand. Nevertheless, gold prices remain elevated.

Technical Analysis of XAU/USD

Recently, we outlined three reasons why gold’s rally might pause. Since then, the price has consolidated within the $3,610–3,660 range.

This has confirmed the assumption that the median line of the long-term ascending channel is acting as resistance. The steep upward channel (marked with orange lines) has been broken.

What Could Happen Next

→ From a bullish perspective, the resistance levels at $3,510 and $3,575 have been broken to the upside and successfully retested – a sign of strong demand.
→ From a bearish perspective, the candlestick’s long upper shadow, where gold set its record high, reflects aggressive selling pressure.

An attempt to break below the $3,575 support level and the orange dotted line (an additional support trendline plotted beneath the orange channel) could happen.

However, whether this scenario materialises will largely depend on upcoming central bank announcements. Traders should brace for heightened volatility.

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