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Gold (XAU/USD) rallies sharply on Monday, gaining 0.80% as investors seem confident that the Federal Reserve (Fed) will slash rates at the December meeting as US economic data continues to flow. At the time of writing, XAU/USD trades near $4,100 after hitting a daily low of $4,040.

XAU/USD climbs for a fourth day inside its tight range on falling Treasury yields
 

The non-yielding metal resumed its advance, yet it remains confined to the $4,040-$4,100 range for the fourth consecutive trading day. Dovish comments by Federal Reserve officials increased the likelihood of a 25-basis-point (bps) rate cut at the December meeting.

Fed Governor Christopher Waller supports a December cut, echoing last Friday’s comments by the New York Fed President John Williams, who said that a December cut is possible, due to a weakened labor market.

Although the Greenback remains solid, the yellow metal performs well, propelled by the fall of US Treasury yields due to speculation of a low-interest-rate environment.

Consequently, market participants see a 76% chance of a December rate cut, a sharp jump from 42% a week ago, according to the FedWatch Tool.

Ahead this week, the US economic docket will feature the ADP Employment Change 4-week average, the Producer Price Index, and Retail Sales on Tuesday. By Wednesday, Durable Goods Orders and Initial Jobless Claims could set the stage ahead of Fed officials entering their blackout period.

Daily market movers: Dovish comments drive Bullion’s price higher
 

• Federal Reserve Governor Christopher Waller expressed support for a rate cut in December but said a move in January is less certain. In an interview with Fox Business, Waller noted that “most of the private sector and anecdotal data we've gotten is that nothing has really changed. The labor market is soft — it’s continuing to weaken.”
• Gold prices so far have ignored advances in the geopolitical front as the US and Ukraine work on a plan to end the war with Russia. The 28^th point plan drafted by the White House and the Kremlin is seen as favorable to the latter.
• Last Friday, NY Fed John Williams said they can still cut rates in the “near-term”, which boosted odds for a December move.
• The US Dollar Index (DXY). which tracks the buck’s performance versus six currencies, registers modest gains of 0.05% at 100.26. At the same time, US Treasury yields fall, with the 10-year US Treasury note yield falling two and a half basis points to 4.042%. US real yields, which correlate inversely to Gold prices, are falling nearly two basis points to 1.827%.

Gold technical outlook: Poised to clear $4,100
 

Gold trades sideways as investors wait for the next catalyst. Technical indicators like the 20- and 50-day Simple Moving Averages (SMAs) are flat, with the 20-day SMA being the first support at $4,045. The Relative Strength Index (RSI) is bullish; hence, the path of least resistance is upwards.

XAU/USD first resistance would be $4,100, followed by $4,150 and by the last cycle high of $4,245, November’s 13 peak. On the flipside, Gold’s first support is the 20-day SMA, followed by the November 18 swing low of $3,998, ahead of testing the 50-day Simple Moving Average (SMA) at $3,989.
 

Gold daily chart

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