Daily Price Outlook
Gold price (XAU/USD) failed to stop its bearish trend and remained well offered around 29.55 level, hitting the intra-day low of 29.41 level.
However, the reason for its downward trend can be attributed to the bullish US dollar, which gained traction in the wake of the Federal Reserve's (Fed) hawkish signal that there would be fewer rate cuts in 2025.
Moreover, the upticks in the US dollar were further bolstered by the optimism over US President-elect Donald Trump's expansionary policies.
On the other hand, the geopolitical risks from the protracted Russia-Ukraine war and tensions in the Middle East, along with concerns about Trump's tariff plans, should limit losses for the safe-haven Gold price.
Traders now look forward to the release of the final US Services PMI and Factory Orders data for some impetus later during the North American session.
Meanwhile, the stronger-than-expected Caixin China Services PMI signals economic growth, supporting risk appetite and reducing demand for safe-haven assets like gold.
Meanwhile, the disappointing Manufacturing PMI adds uncertainty, but overall, gold remains under pressure from global economic optimism.
US Dollar Strength and Economic Resilience Weigh on Gold Prices Amid Geopolitical Tensions
On the US front, the broad-based US dollar has been flashing green as it remains close to a two-year high. This strength is driven by the Federal Reserve's (Fed) recent hawkish signals, suggesting fewer rate cuts in 2025.
Additionally, optimism about US President-elect Donald Trump's expansionary policies continues to support the dollar. As a result, the strong dollar is putting pressure on gold, which struggles to perform well when the dollar is rising.
On the data front, the US economy showed signs of resilience with the ISM Manufacturing PMI improving to 49.3 in December, better than the market expectation of 48.4.
This positive data, alongside lower-than-expected Initial Jobless Claims for the week ending December 27, suggests that the economy is doing better than anticipated.
Richmond Fed President Thomas Barkin also emphasized that the Fed should maintain restrictive policy rates until inflation moves closer to the 2% target. These factors combined are helping to support the US dollar.
Apart from this, the ongoing escalating geopolitical tensions, such as the ongoing Russia-Ukraine conflict and concerns in the Middle East, continue to support the US dollar as a safe-haven currency.
The uncertainty caused by these events, along with caution about President-elect Trump's economic policies, is keeping the dollar strong.
Traders remain cautious about future rate cuts due to persistent inflationary pressures, with fewer expected in 2025. This combination of factors is likely to keep the US dollar strong in the near term, further weighing on gold prices.
Therefore, the strength of the US dollar, driven by the Fed's hawkish stance, positive economic data, and geopolitical tensions, is putting downward pressure on gold.
China's Economic Growth and Its Potential Impact on Gold Prices
On the China front, the Caixin China Services Purchasing Managers' Index (PMI) rose to 52.2 in December, up from 51.5 in November, showing the fastest growth in the services sector since May. This exceeded market expectations of 51.7, suggesting strong performance in the services industry.
However, the Caixin Manufacturing PMI dropped unexpectedly to 50.5 in December, down from 51.5 in November, which fell short of market forecasts. This highlights mixed signals in China’s economic recovery, with the services sector performing well, but manufacturing facing challenges.
In addition, the Shanghai Stock Exchange has committed to further opening up capital markets during a meeting with foreign institutions.
This move aims to attract more foreign investment into China, supporting economic growth. Despite some challenges, China’s economy remains resilient, supported by solid fundamentals that help it navigate a complex global environment.
Looking ahead, the People's Bank of China (PBoC) is expected to cut interest rates at an appropriate time this year, which could help stimulate further growth.
The National Development and Reform Commission (NDRC) expressed confidence in continuing the recovery in 2025, with plans to increase funding through ultra-long treasury bonds to support key programs. These efforts are expected to maintain steady consumption growth in China throughout the year.
Therefore, the positive growth in China’s services sector and plans for economic support could strengthen investor confidence, leading to a potential rise in demand for gold as a safe-haven asset. However, any rate cuts from China’s central bank may also weigh on gold's appeal.
GOLD (XAU/USD) – Technical Analysis
Gold (XAU/USD) is trading at $2,631.54, down 0.31% on the day, struggling to maintain momentum as the US dollar and Treasury yields remain elevated.
The immediate pivot point at $2,639.26 acts as a critical resistance level, with further upside capped by $2,662.22, $2,675.23, and $2,692.86.
Conversely, key support levels are positioned at $2,621.73, $2,605.08, and $2,583.91, where buyers may step in.
The RSI currently reads 46, reflecting neutral momentum but leaning towards bearish sentiment. The 50 EMA at $2,626.94 underscores near-term resistance, aligning with the pivot point.
Gold’s inability to decisively break above $2,639 suggests sellers are retaining control, with a potential move toward $2,614 if the downward trend persists.
From a technical perspective, the broader outlook remains bearish below $2,639, with the descending trendline and weakening RSI pressuring further declines.
A break below $2,621 could accelerate selling toward $2,605 and $2,583, marking critical downside targets. However, a bullish recovery would require a sustained push above $2,662 to invalidate the current bearish setup.
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