Gold prices retreated during Asian trading hours on Tuesday (December 16), briefly falling below the $4,300 mark, and are currently trading around $4,285 per ounce, a decline of approximately 0.5%. This movement was mainly influenced by profit-taking by short-term futures traders and the liquidation of weak long positions. Furthermore, optimism surrounding positive progress in the Ukraine peace negotiations also somewhat diminished gold's appeal as a traditional safe-haven asset, leading to a temporary weakening of demand.

Despite short-term pressures, the potential downside for gold prices is expected to be limited. Last week, the U.S. Federal Reserve implemented its third interest rate cut this year and clearly signaled that rate cuts would continue into 2026. Lower interest rates will significantly reduce the opportunity cost of holding non-yielding gold, thus providing solid support for the precious metal. However, optimistic progress in the Ukraine peace negotiations may limit gold's upside potential, as this would reduce market demand for safe-haven assets.

Due to the US government shutdown, a series of important economic data releases have been postponed and will be concentrated on Tuesday evening. Among them, the US non-farm payrolls report (NFP) will undoubtedly be the absolute focus of market attention. This report will provide more key clues about the Federal Reserve's future interest rate path. If the data shows signs of a slowdown in the US labor market, it will further strengthen market expectations for a Fed rate cut, thereby boosting gold prices. In addition, US retail sales data and the Purchasing Managers' Index (PMI) will also be released on the same day, and these indicators are also worth close attention from investors.

Daily Market Highlights: The prospect of further Fed rate cuts supports gold, but easing geopolitical risks exert downward pressure.

U.S. officials said Monday that an agreement with Ukrainian President Zelensky to end the war between Russia and Ukraine is nearing completion, although strong security guarantees from the U.S. and European countries remain a key sticking point, despite the unresolved territorial dispute.

New York Fed President John Williams pointed out on Monday that monetary policy is well-positioned for next year following last week's rate cut, with employment risks rising while inflation risks have eased somewhat.

Federal Reserve Governor Stephen Milan reiterated his view that current policy remains too tight. He also stated that he will likely remain at the central bank after his term expires until a new person is confirmed to take over.

According to the Summary of Economic Projections (SEP, also known as the "dot plot"), the median forecast indicates only one 25-basis-point rate cut by the end of 2026. However, financial markets generally expect at least two rate cuts by the end of the year.

According to CME Group’s FedWatch tool, federal funds futures imply a 75.6% probability that the January meeting will keep interest rates unchanged, unchanged from the previous day.

Technical Analysis: Gold's long-term upward trend remains unchanged, while short-term momentum is strengthening.

From a technical chart perspective, gold prices edged lower on the day. However, the overall bullish pattern for the precious metal remains solid on the four-hour chart. Prices are well above the key 100-day exponential moving average (EMA), indicating that the path of least resistance still points upwards. Furthermore, the Bollinger Bands have widened, and the 14-day Relative Strength Index (RSI) is holding above the midline, nearing 60.0, suggesting that short-term bullish momentum is gradually strengthening.

On the upside, the first resistance level appears at the December 15 high of $4,350. If the rally continues, gold may test the upper Bollinger Band at $4,365. Further up, the all-time high of $4,381 needs to be watched.

On the downside, gold is currently testing support near the December 15 low of $4,285. Further selling could open the door to the December 12 low of $4,257. If selling pressure persists, gold prices could test the 100-day EMA near $4,210.


(Spot gold 4-hour chart, source: FX678)

Conclusion: Short-term volatility has increased, but the long-term trend remains positive. Investors should pay close attention to the guidance provided by non-farm payroll data.

Overall, while profit-taking and progress in the Ukraine peace talks have put short-term pressure on gold, expectations of further easing by the Federal Reserve and potential signs of weakness in the labor market continue to provide strong underlying support. In the current high-level consolidation, today's non-farm payroll report will be a key catalyst in determining the short-term direction of gold. Weak data will strengthen expectations of interest rate cuts, pushing gold back into an upward trend; conversely, it may trigger more profit-taking. Investors should remain cautious, closely monitor data developments, and seize potential trading opportunities.

At 13:27 Beijing time, spot gold was trading at $4283.54 per ounce.