The Federal Reserve's dovish stance continues to support gold prices, with technical indicators suggesting further upside potential.

The gold market has been trending higher recently under the combined influence of multiple positive factors. From a fundamental perspective, the recent dovish policy signals released by Federal Reserve officials have provided important support for precious metals’ rise. The latest remarks from Federal Reserve Board member Christopher Waller and New York Fed President John Williams have reinforced market expectations of a rate cut again this month, which directly benefits the allocation value of non-yielding assets like gold.

The weakening of the US dollar further enhances gold’s attractiveness. Influenced by expectations of rate cuts, the US dollar index recently fell to a two-week low, creating a favorable environment for XAU/USD to rise. Meanwhile, White House economic advisor Kevin Hasset stated last Sunday that he would be willing to oversee the US Federal Reserve if appointed, and he expects to implement a more accommodative monetary policy. This signal pushed gold prices to a six-week high during Monday’s Asian session.

Geopolitical tensions and economic softness add to safe-haven demand

In addition to the Fed’s policy expectations, multiple challenges facing the global economy also support investors’ risk-averse sentiment. Recent manufacturing data from China has been weak, with a private survey released on Monday showing manufacturing activity unexpectedly contracting, and official PMI remaining in contraction for eight consecutive months, putting pressure on the market. Asian stock markets generally showed a weaker tone, further boosting demand for safe assets like gold.

Tensions in geopolitical situations are also noteworthy. Recently, a Ukrainian drone attacked a Russian “shadow fleet” oil tanker, and the risk of escalation in the Russia-Ukraine war persists. US Secretary of State Antony Blinken said talks with Ukrainian officials were productive, but he pointed out that ending the conflict still requires more effort. This uncertainty adds support to gold’s safe-haven properties.

Technical outlook provides further upside roadmap

From a technical perspective, there is still considerable room for gold prices to rise. If the price confirms above the $4,250 level and continues upward, it will open a new upward channel for bulls. The oscillators on the daily chart are currently gaining positive momentum. Considering this technical environment, gold is expected to break through resistance near $4,277 to $4,278 and further advance toward the $4,300 target.

On the downside, the recent support level was formed around $4,200 during the Asian session. If the price encounters selling pressure in this area, any pullback could present an entry opportunity for long-term buyers, with the $4,155 to $4,153 zone providing additional support. However, if this key level is broken, it could trigger a technical sell-off, accelerating the decline toward $4,100, approaching the confluence point at $4,073. This point includes the 200-period exponential moving average on the 4-hour chart and the upward trendline since late October.

Macro data releases will determine short-term direction

Traders are currently closely watching upcoming US economic data. The release of the ISM Manufacturing PMI later this week will serve as a new catalyst, followed by key US macroeconomic indicators at the start of this month, which will influence short-term volatility in XAU/USD. Changes in US dollar demand will further determine the trend of gold prices. Although gold is supported by both technical and fundamental factors, bulls remain cautious ahead of important data releases, opting to wait rather than rush into aggressive positions, which also explains the lack of sustained buying before further upside.