Daily Price Outlook
Gold prices (XAU/USD) sustained their bullish trend and are still flashing green around the 2,665 level, marking their fourth consecutive session of gains.
This steady upward momentum has been a highlight of 2024, with gold soaring over 27%, its best annual performance since 2010. The ongoing rally is largely driven by strong demand for safe-haven assets, especially with the ongoing geopolitical tensions in the Middle East and the long-standing Russia-Ukraine conflict.
On the flip side, the US Dollar Index (DXY) has climbed to a fresh multi-year high of 109.56, boosted by the latest Jobless Claims data from the United States.
This rise in the USD has somewhat capped gold's further gains, as the dollar's strength puts pressure on other assets, including precious metals. Despite this, gold continues to hold its ground, driven by its appeal as a safe haven in uncertain times.
US Dollar Strengthens Amid Positive Job Data and Geopolitical Tensions, Posing Pressure on Gold Prices
On the US front, the broad-based US dollar managed to recover some ground and turned bullish as the US Dollar Index (DXY) climbed to a fresh multi-year high of 109.56.
This move followed better-than-expected Initial Jobless Claims data for the week ending December 27.
The number of individuals filing for unemployment benefits for the first time was 211K, lower than the expected 222K and the previous figure of 220K. However, the index eased slightly to around 109.20 at the time of writing.
Traders remain cautious about potential economic policies under President-elect Trump, particularly concerns about higher tariffs and the rising cost of living.
The Federal Reserve's recent projections also added to the unease, indicating fewer rate cuts in 2025 due to ongoing inflation.
At the same time, geopolitical tensions, especially in the Middle East and the ongoing Russia-Ukraine war, continue to support the USD, a traditional safe-haven currency.
Analysts pointed out that the greenback is benefiting from growing economic concerns in other parts of the world amid these geopolitical risks.
The strengthening US dollar, driven by positive job data and geopolitical tensions, may put pressure on gold prices.
As the dollar rises, gold becomes more expensive for holders of other currencies, potentially limiting further gains in the precious metal.
China's Economic Recovery and Potential Rate Cut May Boost Gold Prices
On the other hand, gold prices found support from news that the People's Bank of China (PBoC) may cut interest rates this year.
This move is expected to stimulate economic growth in China, a key factor for global demand, including gold.
As a major consumer of gold, any recovery in China’s economy tends to boost gold prices, especially if there’s increased demand for the precious metal.
Traders are keeping a close eye on this development, as lower interest rates could lead to more liquidity in the market, potentially pushing gold prices higher.
Moreover, China’s National Development and Reform Commission (NDRC) expressed confidence in the country’s economic recovery for 2025, with plans to increase funding through ultra-long treasury bonds to support key growth programs.
This comes alongside positive manufacturing data from China, showing that supply and demand are expanding, and new orders continue to rise.
This improved economic outlook could support gold as a store of value, with investors seeking safety in the precious metal amid global uncertainties.
President Xi Jinping also reaffirmed his focus on economic growth, promising more proactive policies in 2025, which may further strengthen gold’s appeal.
Therefore, the potential interest rate cut by the People’s Bank of China and the country’s positive economic outlook could boost gold prices.
As China’s economy recovers and demand for gold increases, investors may turn to gold as a safe-haven asset.
GOLD (XAU/USD) – Technical Analysis
Gold (XAU/USD) is trading at $2,654.42, down 0.15%, reflecting mild bearish pressure as it consolidates below the pivot point at $2,663.01.
The 4-hour chart suggests a cautious outlook, with immediate resistance positioned at $2,676.29, followed by $2,692.86 and $2,707.37.
On the downside, key support levels are found at $2,639.26, $2,621.73, and $2,605.08, acting as critical safety nets for potential pullbacks.
The 50-day Exponential Moving Average (EMA) at $2,627.19 reinforces the bearish sentiment as Gold trades above this level but struggles to maintain upward momentum.
The Relative Strength Index (RSI) at 64 signals moderate bullish bias but warns of nearing overbought territory, limiting aggressive buying activity.
A sustained move below the pivot point at $2,663.01 could invite selling pressure, targeting the immediate support at $2,639.26.
Conversely, a break above $2,676.29 may shift sentiment towards bullishness, potentially aiming for $2,692.86.
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