As the XAU/USD chart shows, gold rallied yesterday to near its October all-time high around the 4,380 level, before pulling back (as indicated by the arrow).

The surge in volatility was driven by a combination of factors:

→ Expectations of US rate cuts. According to media reports, data released yesterday showed that inflation slowed to 2.7% in November, below the 3.1% forecast, while core CPI eased to 2.6%, the lowest reading since March 2021. Markets are currently pricing in roughly a 25% chance of a rate cut in January, with a cut by April seen as almost certain.

→ Geopolitical tensions. Traders are closely monitoring developments linked to Venezuela, where the risk of an armed conflict involving the United States has increased. Market participants also reacted to statements from UK and European politicians ahead of the EU summit.

On 5 December, we:
→ noted that the lack of a clear trend had resulted in the formation of a symmetrical triangle, with its midline around $4,205;
→ suggested that this pattern on the XAU/USD chart could act like a “compressed spring”, eventually leading to a volatility breakout.

Such a volatility surge materialised on 11–12 December, when gold broke out of the triangle and posted a high near $4,340.

Since then, a new triangle has begun to form, with a central axis around $4,316, reflecting a developing balance between supply and demand. In this context, it is worth highlighting that:

→ yesterday’s rally and subsequent reversal can be interpreted as a false bullish breakout, signalling strong selling pressure near the record high and suggesting that gold may retreat towards the lower boundary of the emerging triangle;

→ the approaching holiday period is typically associated with thinner market liquidity, which often amplifies price swings. In such conditions, gold could still surprise traders with another push to fresh record highs.

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