Daily Price Outlook
Gold (XAU/USD) is under pressure as it trades near $2,750, down 0.65% in the European session on Monday. The drop is mainly due to the US Dollar (USD) recovering from its recent low, which weakens gold’s appeal.
Meanwhile, US President Donald Trump's announcement of tariffs on all Colombian imports has sparked fresh trade war worries, reducing investor interest in riskier assets.
At the same time, growing concerns about the global economy have driven demand for safe-haven assets.
The Federal Reserve’s potential plan to cut interest rates twice this year is also weighing on US Treasury bond yields. This could limit the USD's gains, providing some support for gold prices despite the decline.
US Dollar Strengthens Amid Economic Data and Trade Uncertainty, Pressuring Gold Prices
On the US front, the broad-based US dollar has been gaining traction after rebounding from a monthly low of 107.22. This rise in the dollar comes amid uncertainty surrounding US President Donald Trump’s trade and immigration policies.
The situation may influence the Federal Reserve (Fed) to adopt a cautious approach regarding interest rate cuts, which has kept pressure on gold prices.
On the data front, the latest data from S&P Global shows a mixed picture for the US economy. The US Composite PMI dropped to 52.4 in January from 55.4 in December, while the Manufacturing PMI rose slightly to 50.1, exceeding expectations.
However, the Services PMI fell to 52.8, missing the forecast and showing weaker growth in the services sector. Despite these figures, Trump’s comments at the World Economic Forum in Davos, calling for immediate interest rate cuts, have added uncertainty to the market.
On Sunday, he announced a 25% emergency tariff on all Colombian goods, which raised tensions. However, by Monday, Colombia agreed to the terms, resolving the issue.
Despite this, gold prices remain under pressure due to a stronger US dollar and the possibility of Federal Reserve rate cuts, making it harder for gold to gain momentum.
China's Economic Struggles and Market Measures Could Boost Gold Demand as Safe-Haven Asset
On the other hand, Chinese authorities are taking steps to stabilize their stock markets by introducing measures to boost investments.
Pension funds have been allowed to increase investments in domestic equities, and a pilot scheme for insurers to purchase equities is set to launch in early 2025 with a scale of at least 100 billion Yuan.
The People’s Bank of China (PBoC) has also announced plans to expand liquidity tools to support share purchases, aiming to restore confidence in the market.
Despite these efforts, economic data from China highlights ongoing challenges. Industrial profits fell by 3.3% year-over-year in 2024, marking the third consecutive year of contraction.
Hence, the weak demand, deflationary pressures, and a prolonged slump in the property sector continue to weigh on China’s economic performance, further denting investor sentiment. This has fueled concerns about China’s growth outlook, which could indirectly support gold demand as a safe-haven asset.
On the data front, the latest PMI data reflects weaker activity in China. The Manufacturing PMI dropped to 49.1 in January, falling below the key 50 level, indicating contraction.
Similarly, the Non-Manufacturing PMI fell to 50.2, signaling slower growth in the services sector. These economic concerns in the world’s second-largest economy may bolster safe-haven flows into gold, offsetting some pressure from a stronger US dollar.
GOLD (XAU/USD) – Technical Analysis
Gold (XAU/USD) is experiencing downward pressure, currently trading at $2,755.43, down 0.56% in today’s session. The precious metal remains below key resistance levels, with bearish sentiment prevailing as investors eye the Federal Reserve’s upcoming policy decision.
Gold prices are testing the immediate support level of $2,753.77, aligning with the 50-day EMA at $2,753.96. A break below this level could accelerate selling pressure, potentially driving prices toward the next support at $2,735.77, followed by $2,718.32.
On the upside, immediate resistance stands at $2,782.81, which aligns with recent swing highs. A sustained breakout above this level could trigger further buying momentum, targeting the next resistance zones at $2,797.37 and $2,813.75.
However, market sentiment remains cautious, with investors focusing on inflation data and the Fed’s interest rate outlook, which may influence gold’s short-term trajectory.
The 50-day EMA is providing dynamic support, but a break below could suggest a shift in market sentiment, leading to further downside risks.
If gold maintains support above $2,750, it could present a buying opportunity with a target towards $2,782. Conversely, failure to hold above this level may reinforce bearish momentum.
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