As the European session kicked off this Monday, gold prices managed to draw in some dip-buying interest, but the precious metal couldn’t quite sustain its upward momentum, hovering above the $2,700 level. The day’s buoyant mood in equity markets was a major factor holding back the safe-haven appeal of gold. Many traders seemed hesitant to take bold positions, preferring instead to await clarity from the inaugural address of US President-elect Donald Trump scheduled for later in the day.
Meanwhile, whispers of cooling inflation in the US have triggered speculation about the Federal Reserve potentially trimming interest rates twice this year. This outlook has sparked a wave of selling in the US Dollar, reversing its gains from Friday, and providing some support for gold, which doesn’t offer yields. With US banks closed for Martin Luther King Jr. Day, market conditions remain a bit unpredictable, urging traders to tread carefully with any significant moves in the XAU/USD pair.
Gold price traders hesitant as Trump’s inauguration looms
For the third week in a row, gold prices have been on an upward trajectory, buoyed by the possibility that the Federal Reserve may not rule out further interest rate cuts in 2025. Last week, data from the US Producer Price Index (PPI) and Consumer Price Index (CPI) showed that inflationary pressures were easing by December. Further boosting these expectations, Fed Governor Christopher Waller noted last Thursday that inflation is likely to decelerate, allowing for potential faster and earlier rate cuts.
The US Dollar’s struggle to build on Friday’s positive movement, alongside anxieties surrounding Trump’s expected aggressive trade tariffs, supports gold’s safe-haven appeal. In addition, developments like the Israel-Hamas ceasefire and speculations that Trump may seek to ease restrictions on Russia in exchange for a resolution to the Ukraine conflict add to the optimistic risk sentiment. With the Federal Reserve expected to halt its rate cuts later this month due to concerns that Trump’s policies might drive inflation higher, the appeal of non-yield-bearing assets like gold remains capped. Traders also seem cautious with their strategies, waiting for Trump’s inaugural address and the Martin Luther King Jr. Day holiday in the US.
Key levels for gold prices may signal more substantial declines
From a technical standpoint, any further increase in gold’s price might encounter resistance around the $2,715 level and subsequently near the $2,724-2,725 region, which marked its peak last Thursday. The daily chart oscillators are showing increased positive momentum, suggesting that continued buying could see the price head towards the $2,745 barrier, eventually targeting the all-time high of around $2,790 achieved in October 2024.
Conversely, should gold slip significantly below the $2,700-2,690 immediate support range, this might present a buying opportunity, with potential losses contained to the vicinity of $2,662-2,662. This area serves as a crucial threshold; falling beneath this level could lead to further depreciation to around $2,635, and subsequently, the $2,620-2,615 support zone. This latter confluence incorporates a short-term upward trend line from November’s low, complemented by the 100-day Exponential Moving Average (EMA).
