Daily Price Outlook
Gold prices (XAU/USD) remain under heavy pressure, with the precious metal trading near the $2,695 level after hitting a low of $2,690 earlier in the day.
The primary factor behind this decline is the growing expectation that the Federal Reserve will hold off on cutting interest rates later this month. This has boosted the US Dollar (USD), which had previously dipped to a one-week low.
Besides this, the signs of easing inflationary pressures in the US are contributing to the downtrend in gold. The latest economic reports have fueled speculation that the Fed might not completely rule out further rate cuts by year-end, a scenario that typically benefits gold.
However, the decline in US Treasury bond yields has relatively restricted the USD’s upward momentum, offering potential relief for gold in the coming sessions.
Gold's losses have been capped by the ongoing geopolitical risks, notably the uncertainty surrounding former President Trump's tariff plans and their potential impact on global economic growth.
These factors have instilled caution in the market, preventing any sharp drops in gold prices as traders await crucial US economic data.
US Economic Data and Fed Policy Drive Market Sentiment
However, the strength of the US dollar has been sustained by market expectations that the Fed will pause its rate-cutting cycle for now. This anticipation has fueled the USD's recent rally, putting pressure on gold (XAU/USD) and limiting its potential gains.
Recent economic data has contributed to the outlook that the Fed may hold off on further rate cuts. The latest inflation report revealed that the Consumer Price Index (CPI) rose by 0.4% in December, pushing the annual rate up to 2.9% from 2.7% the previous month.
Although the core CPI slowed to 3.2%, it still exceeded expectations, leading to renewed hopes that the Fed might ease rates further by year-end.
In response, US Treasury yields dropped from their 14-month highs, which in turn pushed the US dollar lower, creating space for gold to find some support.
However, comments from Richmond Fed President Tom Barkin, noting that rates should remain restrictive until inflation targets are firmly in sight, have kept gold’s upside in check.
Geopolitical Risks and Market Uncertainty Amid Ukraine and Gaza Conflicts
On the other hand, the geopolitical risks, particularly in Ukraine and Gaza, continue to add layers of uncertainty to the market. Meanwhile, the conflict in Ukraine escalates, with military strikes from both sides targeting vital infrastructure, tensions in Gaza remain high despite a recent ceasefire agreement.
Investors remain watchful, particularly with upcoming US economic reports like Retail Sales and Weekly Jobless Claims, which could offer further guidance on market direction.
GOLD (XAU/USD) – Technical Analysis
Gold prices are trading at $2,691.18, down 0.19% on the day, as the market consolidates near key technical levels. The pivot point at $2,680 serves as a critical threshold, dictating short-term market direction.
Immediate resistance is noted at $2,696.72, with further targets at $2,710.98 and $2,724.66 if bullish momentum continues. On the downside, immediate support lies at $2,664.75, followed by $2,645.00 and deeper support at $2,627.99.
The 50-day EMA, currently at $2,666.75, aligns closely with the first support level, reinforcing the bearish outlook below the pivot point.
A recent test of $2,700 failed to sustain, highlighting selling interest at higher levels. Short-term indicators suggest continued bearish pressure if prices fail to break above the pivot.
Traders should monitor price action around $2,680 closely. A decisive break below this level could trigger selling momentum, targeting $2,664.75 initially, with an extended decline toward $2,645.
Conversely, a sustained move above $2,700 may invalidate the bearish bias and open the door for higher resistance levels.
Related News
- USD/JPY Price Analysis – Jan 16, 2025
JOIN LHFX TODAY
24/7 live support, lightning fast withdrawals, guaranteed safe and reliable trading platforms with a true ECN broker.