Daily Price Outlook
Gold prices surged to new heights during the Asian trading session, continuing a three-day winning streak as they reached $2,758.
This rally is being fueled by heightened trade war fears and speculation that the Federal Reserve (Fed) will cut interest rates later this year.
The price of gold has been significantly impacted by escalating trade tensions between the United States and other countries. US President Donald Trump's threats to impose tariffs on Canada and Mexico have raised concerns about a potential global trade war.
As a result, investors have flocked to gold, a traditional safe-haven asset, to protect their wealth from any potential economic fallout.
Accordingly, the fear of a trade war has pushed gold prices to their highest level since early November, marking a major milestone for the yellow metal.
Investors are increasingly seeking gold as a hedge against market volatility and geopolitical instability, driving its recent price surge.
Fed Rate Cut Speculation Boosts Gold's Appeal Amid Yield Decline
In addition to trade concerns, there is growing speculation that the Federal Reserve will lower interest rates twice before the end of the year. On the data front, US Retail Sales for December increased by 0.4% month-over-month, reaching $729.2 billion. This was below expectations of a 0.6% rise and lower than the previous month’s 0.8% increase.
In the meantime, the US Consumer Price Index (CPI) rose by 2.9% year-over-year in December, up from 2.7% in November.
On a monthly basis, CPI increased by 0.4%, slightly higher than the previous month’s 0.3%. Core CPI, which excludes volatile food and energy prices, increased by 3.2% annually, a bit lower than the 3.3% expected by analysts.
Despite weaker retail sales data, the US Dollar Index (DXY) is holding steady at around 108.00. The dollar faced some pressure after President Trump chose not to impose new tariffs on his first day in office but directed agencies to look into trade deficits.
His warnings to countries like Mexico, China, and the EU about possible tariffs could influence inflation, affecting the Fed’s future rate decisions.
Therefore, the speculation of Fed rate cuts has led to lower US Treasury bond yields, making gold more attractive as an investment. This has supported gold’s bullish momentum, driving its price higher as investors seek safer, non-yielding assets.
GOLD (XAU/USD) – Technical Analysis
Gold prices are trading at $2,752.22, up 0.26%, as the market grapples with mixed signals amid evolving economic conditions. The metal hovers near the pivot point at $2,752.96, a crucial level that could dictate short-term price movements.
A sustained move below this level may reinforce bearish momentum, with immediate support at $2,738.05 and deeper levels at $2,721.88 and $2,703.20. A break below these supports could open the door for further downside, with sellers eyeing the 50-day EMA at $2,715.81 as a potential downside target.
On the upside, resistance is seen at $2,768.80, followed by key levels at $2,783.31 and $2,797.39. A break above $2,768.80 could trigger further buying interest, potentially challenging the $2,783.31 resistance, which aligns with recent highs. However, for now, the bullish momentum remains constrained by the technical landscape.
From a technical perspective, gold is trading within a narrow range, with the 50-day EMA acting as dynamic support. The market remains cautious, with traders weighing the impact of inflation data and central bank policies.
The outlook suggests a cautious stance, with potential selling pressure intensifying below $2,752, targeting $2,732, with a stop-loss set at $2,765 to manage risk effectively.
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