The yellow metal prices climbed on Friday and this week turned to the best week for gold since mid-November, the dollar weakened despite the Hawkish U.S. Federal Reserve decision.

The Fed delivered on the expected doubling of the taper pace and said Wednesday that it will begin reducing its asset purchases by $30 billion per month starting in the month of January, up from the current $15 billion pace, amid rising inflation and continued recovery in employment. The central bank’s Federal Open Market Committee said after its two-day meeting it would cut monthly Treasury securities purchases by $20 billion and agency mortgage-backed securities acquisitions by $10 billion per month.

Meanwhile, Fed policymakers made a lift in their projections for core inflation, expecting to finish this year at 5.3%, up sharply from the 4.2% average forecast in September. Next year, inflation is expected to slow to 2.6%, but that was higher than the 2.2% seen three months ago.

The dot plot was far more hawkish than the market expectation and it was above where it was priced. The dot plot now shows a 75bp increase in 2022, above the 50bp consensus, along with that the US President Biden also made it clear that officials are ready to start raising rates well before the labor market returns to its pre-COVID state.

On the other hand, Disappointing releases of the US Weekly Initial Jobless Claims data – 206 K vs expectation of 198k and previous data of 188 k, and Philly Fed Manufacturing Index – 15.4 Vs expectation of 27.0 underpinned the bullish trend of XAU/USD. Apart from this, declining US Treasury bond yields turned out to be another factor that also underpinned the trend.

However, Fears of Omicron seem to challenge the gold buyers of late. But the catalysts that favor the buyers are comments from the Chinese Ambassador who conveyed dislike for the US actions against Chinese entities over Xinjiang-related issues.

Elsewhere, A record-high daily Covid cases in the UK leads to the the return of stringent mask mandates in Australia’s Queensland to portray the virus-linked fears. US President Biden earlier mentioned that Omicron is going to start spreading more rapidly.

XAU/USD 4 Hour Chart:

Support: 1783.2 (S1), 1767.2 (S2), 1758.9 (S3).

Resistance: 1807.4 (R1), 1815.6 (R2), 1831.6 (R3).

Yellow metal is up as the dollar weakens as it appears to have been a “buy the rumour, sell the fact” reaction to Fed hawkishness. We expect a bullish trend for XAU/USD.