Gold price remains below $2,800 amid stronger USD; risk-off mood helps limit losses

By Haresh Menghani

• Gold price retreats further from the record high amid a broad-based USD rally.
• Concerns over Trump’s new trade tariffs offer support to the XAU/USD pair.
• Bets for further policy easing by the Fed also help limit losses for the commodity. 

Gold price (XAU/USD) attracts some buyers following intraday slide to the $2,772 regains, though it lacks bullish conviction and remains below the all-time peak touched on Friday. The US Dollar (USD) spikes back closer to over a two-year high in reaction to US President Donald Trump’s decision to impose tariffs on Canada, Mexico, and China. Moreover, speculations that the Federal Reserve (Fed) could delay cutting interest rates for some time this year, amid a rise in prices and surging consumer spending, contribute to driving flows away from the non-yielding yellow metal.

The markets, however, are still pricing in the possibility that the US central bank will lower borrowing costs twice by the end of 2025. Apart from this, concerns about the potential economic fallout from Trump’s trade policies, which triggers a fresh wave of the global risk aversion trade at the start of a new week, drag the US Treasury bond yields sharply lower. This, in turn, offers some support to the non-yielding Gold price and warrants some caution before positioning for any meaningful decline. Traders now look to the US ISM Manufacturing PMI for a fresh impetus. 

Gold price is pressured by stronger USD; downside remains cushioned 

• The US Dollar (USD) spiked in reaction to US President Donald Trump’s move to impose a 25% tariff on Canadian and Mexican imports, and a 10% tariff on goods from China, which, in turn, weighed heavily on the Gold price. 
• The US Commerce Department reported on Friday that inflation closed out 2024 on a strong note and consumer spending surged in December, pushing back expectations for more aggressive easing by the Federal Reserve. 
• The Personal Consumption Expenditures (PCE) Price Index edged higher to 2.6% on a yearly basis in December from 2.4%, while the core gauge climbed 2.8%, matching November’s reading and consensus estimates.
• Moreover, investors remain worried that Trump’s new tariffs, if sustained, could significantly worsen inflation in the US and validate hawkish Fed expectations, further undermining the non-yielding yellow metal.
• US Treasury Secretary Scott Bessent, who pushed for new universal tariffs on US imports to start at 2.5% and rise gradually, said that tariffs are inflationary and would continue to strengthen the US Dollar. 
• Trump’s demand for lower interest rates, along with the prospects for further policy easing by the Fed, keeps the US Treasury bond yields depressed and could help limit any meaningful downside for the commodity.
• Furthermore, worries that Trump’s new tariffs could impact the global economy temper investors’ appetite for riskier assets and warrant some caution before placing bearish bets around the safe-haven XAU/USD. 
• Traders now look to this week’s important US macro data scheduled for the beginning of a new month, starting with the release of the ISM Manufacturing PMI, to determine the near-term trajectory for the precious metal.

Gold price seems poised to prolong over a one-month-old uptrend

From a technical perspective, the intraday slide finds some support near the $2,772 horizontal resistance breakpoint. The said area should now act as a key pivotal point, which if broken might prompt some technical selling and drag the Gold price to the next relevant support near the $2,755 region. The corrective decline could extend further towards the $2,740 intermediate support en route to the $2,725-2,720 area. This is followed by the $2,700 round figure, which if broken decisively could pave the way for deeper losses.

On the flip side, the $2,790-2,800 zone now seems to act as an immediate hurdle ahead of the record high, around the $2,817 region. Given that oscillators on the daily chart are holding comfortably in positive territory and are still away from being in the overbought zone, some follow-through buying will be seen as a fresh trigger for bullish traders. This, in turn, will set the stage for an extension of the recent well-established uptrend from the December monthly swing low.

Source : Fxstreet.com