Daily Price Outlook
Gold price (XAU/USD) struggled to stop its bearish trend and turned bullish around the 2,744 level, reaching an intra-day high of 2,745.
However, the rise in demand for the dollar was mainly caused by renewed inflation worries due to US President Donald Trump's trade tariff threats.
These concerns led to a slight recovery in US Treasury bond yields, which helped the USD rise from its lowest point since December 18.
Despite this, gold losses may be limited because many expect the Federal Reserve to cut interest rates twice by the end of the year.
Trump's comments about pushing for immediate rate cuts also support this idea, which could prevent US bond yields and the dollar from rising too much.
US Dollar Strengthens Amid Trade Uncertainty and Mixed Economic Data
On the US front, the broad-based US dollar has been trading near the 108.00 mark, as tracked by the US Dollar Index (DXY), which measures the dollar's strength against six major currencies.
Traders are closely watching key economic reports like the US Durable Goods Orders, Consumer Confidence, and the Richmond Fed Manufacturing Index, which could influence market sentiment.
The US dollar has been gaining strength amid uncertainty surrounding President Donald Trump’s trade and immigration policies.
Meanwhile, recent US economic data showed mixed signals. The S&P Global Composite PMI dropped to 52.4 in January, while the Manufacturing PMI rose slightly to 50.1.
Trump, however, has expressed his desire for the Fed to cut interest rates immediately, especially with falling oil prices.
This could pressure inflation and limit the Fed's ability to make aggressive rate cuts, especially as the January meeting approaches. Traders expect the Fed to hold rates steady in the 4.25%-4.50% range.
Therefore, the US dollar's strength and mixed economic data may put pressure on gold prices, as a stronger dollar typically makes gold more expensive. However, expectations for the Federal Reserve to keep rates steady could limit further downside for gold.
China's Economic Slowdown Sparks Global Uncertainty, Supporting Gold's Safe-Haven Appeal
On the China front, China's NBS Manufacturing PMI dropped to 49.1 in January, down from 50.1 in December, falling short of expectations.
This signals a contraction in manufacturing activity, as a reading below 50 indicates a decline. Similarly, the NBS Non-Manufacturing PMI also fell to 50.2 in January from 52.2 in December, showing weaker growth in services and construction.
Moreover, China’s Industrial Profits saw a decline of 3.3% year-over-year in 2024, totaling CNY 7,431.05 billion.
Although this decline was slightly smaller than the 4.7% drop in the first 11 months of 2023, it marks the third consecutive year of falling profits.
This ongoing downturn reflects weaker demand, rising deflationary pressures, and struggles within China’s property sector.
These weak economic indicators from China contribute to global market uncertainty. As one of the world's largest economies, China’s slowdown can have a ripple effect on other markets, including commodities like gold.
A weaker Chinese economy may increase demand for gold as a safe-haven asset, potentially supporting its price.
GOLD (XAU/USD) – Technical Analysis
Gold prices are hovering at $2,740.99, posting a marginal gain of 0.02% as investors weigh market sentiment ahead of key economic events.
The pivot point at $2,745.39 remains a critical inflection zone; a sustained move below this level could signal further downside pressure.
Immediate support stands at $2,721.21, with extended declines targeting $2,706.09 and $2,689.39 if bearish momentum intensifies.
On the upside, immediate resistance is positioned at $2,763.67, with additional barriers at $2,786.25 and $2,804.06. A bullish breakout above these levels could reignite upside momentum, challenging recent highs.
However, gold remains vulnerable to short-term volatility, particularly amid fluctuating bond yields and shifting market sentiment.
From a technical perspective, the 50-EMA at $2,756.89 currently acts as a dynamic resistance, reinforcing selling pressure near the pivot.
Failure to break above this level suggests that gold remains bearish in the near term, aligning with the broader corrective trend.
Traders should watch for a decisive break below $2,745 to confirm continued selling momentum, with $2,720 as a near-term target.
Conversely, a strong bounce from current levels could set the stage for a potential reversal, contingent on economic catalysts and broader risk sentiment.
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