Daily Price Outlook
Gold prices have been climbing steadily, recently reaching around $2,674 per ounce, with a peak at $2,675. This upward trend is largely due to ongoing uncertainties about U.S. President-elect Donald Trump's proposed tariffs and rising geopolitical tensions. These factors are making investors nervous, leading them to seek the safety of gold.
Gold is often seen as a safe investment during times of economic or political instability. As concerns grow over potential tariffs and global conflicts, more people are turning to gold to protect their wealth.
Another reason why gold is rising is because people expect Trump's expansionary policies could lead to higher inflation, making gold a good way to protect against rising prices. This has helped keep gold strong in the market.
At the same time, there’s a belief that the Federal Reserve might ease up on cutting interest rates, which has helped keep US Treasury bond yields high and the US Dollar close to a two-year peak.
A stronger dollar could make gold less attractive though, as it becomes more expensive for people holding other currencies.
Traders are also cautious and waiting for the US Nonfarm Payrolls (NFP) report, which could influence market sentiment. Nonetheless, the XAU/USD pair is still on track to finish the week with gains, marking its second consecutive week of upward movement.
US Dollar Strengthens Amid Fed's Hawkish Signals and Economic Data
On the US front, the US Dollar Index (DXY), which tracks the dollar’s performance against six major currencies, remains steady above 109.00.
The dollar has gained support from hawkish signals in the Federal Reserve's meeting minutes and uncertainties surrounding the incoming Trump administration’s trade and tariff plans.
These factors have kept the Greenback strong, with the Federal Reserve signaling that controlling inflation may take longer than expected.
The minutes mentioned that recent inflation readings have been hotter than anticipated, and changes in trade and immigration policies under Trump could delay efforts to manage inflation.
In addition, Federal Reserve officials are working hard to address market reactions to a much slower pace of rate cuts in 2025 than many had expected.
Kansas Fed President Jeffrey Schmid recently stated that the Fed has met most of its targets and that interest rate policy is approaching a long-term balance.
He emphasized that future rate cuts should be gradual and based on economic data. On the economic data front, US Initial Jobless Claims fell to 201,000 for the week ending January 3, beating expectations.
Meanwhile, the ADP Employment Change in December was 122K, below the expected 140K. The ISM Services PMI for November rose to 54.1, above the forecast of 53.3, signaling growth in the services sector.
However, the Prices Paid Index, which tracks inflation, rose sharply, indicating that inflationary pressures remain a concern.
Therefore, the strengthening US Dollar, driven by hawkish Federal Reserve signals and inflation concerns, could limit gold’s price gains.
Hence, the stronger dollar makes gold more expensive for holders of other currencies, reducing demand and weighing on its value.
GOLD (XAU/USD) – Technical Analysis
Gold (XAU/USD) is trading at $2,673.04, reflecting modest gains as it holds above the pivot point at $2,663.62. The 4-hour chart indicates a cautiously bullish sentiment, with immediate resistance at $2,687.65.
A breakout above this level could propel prices toward the next targets of $2,704.34 and $2,724.66. On the downside, immediate support lies at $2,662.44, with deeper levels at $2,603.20 and $2,583.91.
The 50 EMA at $2,641.87 reinforces the short-term bullish momentum, as the price remains above this level. RSI readings hover near neutral, suggesting room for further upside if bullish momentum strengthens.
However, traders should monitor price action closely near the pivot, as a sustained break below $2,663.62 could shift sentiment bearish, driving a move toward key support at $2,624.44.
Market participants are focused on geopolitical risks and upcoming U.S. economic data, particularly the Nonfarm Payrolls (NFP) report.
These factors could significantly influence gold's near-term trajectory. A close above $2,687.65 would validate bullish momentum, targeting higher resistance levels. Conversely, failure to hold above the pivot risks a deeper pullback to the lower support zones.
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