Daily Price Outlook
Gold price (XAU/USD) prolonged its bearish rally and hit the intra-day low of $2,857 level. However, the losing trend was mainly triggered by the strengthening US dollar, which continued its recovery for the third consecutive day.
The dollar's rise came as traders expected the Federal Reserve (Fed) to maintain its hawkish stance due to persistent inflation.
Despite the bearish momentum, traders remain cautious ahead of the US Personal Consumption Expenditure (PCE) Price Index data.
This report will provide clues about the Fed’s future interest rate decisions, which could impact gold’s next move.
Meanwhile, concerns over former US President Donald Trump's tariff plans and broader economic uncertainty could still support gold as a safe-haven asset.
Gold Slips as Strong US Dollar and Inflation Concerns Weigh on Prices
On the US front, the broad-based US Dollar edged higher mainly due to rising inflation, which strengthens the case for the Federal Reserve to keep interest rates steady.
This move helped the US Dollar recover from a two-month low, weighing on gold prices and pushing them to a two-week low.
On the data front, the latest data from the US Bureau of Economic Analysis showed that the economy grew at a 2.3% annualized pace in the final quarter of 2024, as expected. in the meantime, the GDP Price Index rose by 2.4%, which was higher than the previous estimate of 2.2%, signaling persistent inflation.
These developments, combined with concerns that US President Donald Trump's policies could fuel inflation, are supporting the US Dollar and dragging gold prices lower.
The Federal Reserve is also hesitant to cut interest rates because inflation remains high. This keeps the U.S. Dollar strong, making gold less attractive to investors since it does not offer interest.
Fed officials, including Kansas City Fed President Jeff Schmid and Cleveland Fed President Beth Hammack, have emphasized that controlling inflation is their priority and that rates may stay high for now.
Markets are now focused on the US Personal Consumption Expenditure (PCE) Price Index, which will give new clues about inflation.
Gold Finds Support Amid Rising Trade Tensions and Geopolitical Risks
On the geopolitical front, the losses in gold could be short-lived as rising trade tensions may boost its safe-haven demand. U.S. President Donald Trump announced that his proposed 25% tariffs on Mexican and Canadian goods will take effect on Tuesday, along with an extra 10% duty on Chinese imports.
He justified these measures by citing the ongoing issue of deadly drugs, particularly fentanyl, entering the U.S. from these countries. This decision could escalate trade tensions, potentially disrupting global markets and increasing uncertainty, which often supports gold prices.
Meanwhile, the additional tariffs on China come just as the country prepares for its annual parliamentary meetings, where it will outline its economic plans for 2025. This puts pressure on Beijing to respond quickly with countermeasures.
Trump's tough stance signals growing tensions between the U.S. and its strategic rival, which could lead to further instability in global trade. If China retaliates, it could trigger market volatility, increasing demand for gold as a safe-haven asset.
GOLD (XAU/USD) – Technical Analysis
Gold (XAU/USD) is trading at $2,864.54, showing a slight uptick of 0.04% but remains under pressure as it hovers below the Pivot Point at $2,868.01. The metal faces significant resistance at $2,889.16, followed by stronger barriers at $2,906.26 and $2,930.44.
These resistance levels align with the 50-day Exponential Moving Average (EMA) at $2,913.75, reinforcing a bearish bias unless gold breaks above this level.
On the downside, immediate support is seen at $2,848.61, with deeper cushions at $2,831.24 and $2,815.11. A break below $2,848.61 could accelerate the bearish trend, pushing prices toward the lower support zones.
Conversely, a sustained move above $2,868.01 could challenge the $2,889.16 resistance level, potentially shifting momentum toward the bulls.
The technical setup indicates a bearish bias as long as gold remains below the 50 EMA and the Pivot Point. The daily chart shows a descending trendline, further confirming selling pressure. Traders should watch for a potential breakdown below $2,848.61, which could trigger a more substantial sell-off.
For now, the recommended strategy is to Sell Below $2,867, with a Take Profit at $2,848 and a Stop Loss at $2,880. Monitoring price action near $2,868.01 will be crucial, as a break above this level could invalidate the bearish outlook.
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