23 Jan 2025

    Gold price retreats from a near three-month top amid an uptick in the US bond yields and the USD.
    Bets for further interest rate cuts by the Fed might hold back the USD bulls from placing fresh bets.
    Concerns about Trump’s tariff plans should further lend support to the safe-haven precious metal.
Gold prices (XAU/USD) are experiencing some selling pressure during the Asian session on Thursday, appearing to have ended a three-day upward trend that reached its highest point since early November, around the $2,763-2,764 range observed the previous day. The US Dollar (USD) is attempting to capitalize on the overnight rebound from its monthly low, supported by a further increase in US Treasury bond yields. This situation, combined with a prevailing bullish sentiment in the equity markets, is contributing to a decline in demand for the safe-haven asset.

In addition, indications of easing inflation in the United States have rekindled expectations that the Federal Reserve (Fed) may implement two rate cuts this year. Such developments could pose challenges for US bond yields and the USD. Furthermore, the uncertainty surrounding US President Donald Trump’s tariff strategies, which could instigate trade conflicts and heighten market volatility, is likely to provide some support for gold prices. Therefore, it would be wise to await substantial follow-through selling before concluding that the month-long uptrend has lost momentum and before considering positioning for more significant declines.

The US Dollar remains stable above its lowest point since late December, which was reached on Wednesday, as there is a slight recovery in US Treasury bond yields. This situation has led to some selling pressure on Gold prices on Thursday.

The absence of specific information regarding US President Donald Trump's tariff strategies, coupled with a reduction in geopolitical tensions, continues to foster a risk-on sentiment, further diminishing the appeal of the safe-haven precious metal.

Trump's proposed economic policies are largely perceived as inflationary, potentially forcing the Federal Reserve to maintain its hawkish approach and sustain elevated interest rates for an extended period to combat rising inflationary pressures.

Nevertheless, investors are still factoring in the likelihood that the US central bank may reduce borrowing costs at least twice before the year concludes, which could limit the potential gains for both US bond yields and the Dollar.

Attention will be focused on Trump's address at the World Economic Forum for more definitive information regarding tariffs. Additionally, the upcoming release of the US Weekly Jobless Claims is expected to influence the XAU/USD dynamics.

The Bank of Japan is set to announce its decision following a two-day policy meeting on Friday, with expectations of an interest rate increase from 0.25% to 0.50%, marking the highest level since the global financial crisis of 2008.

Rate decisions from the Federal Reserve and the European Central Bank are anticipated next week on Wednesday and Thursday, respectively, which could introduce volatility and impact the non-yielding yellow metal.

Gold price could attract some dip-buying near the $2,725-2,720 hurdle-turned-support

From a technical standpoint, any subsequent decline is likely to encounter significant support near the $2,625-2,620 level, which has transitioned from a strong horizontal resistance breakpoint to support. Continued selling pressure could push the Gold price down to the $2,700 threshold, and a decisive breach of this level may lead to further declines. The XAU/USD could subsequently drop towards the $2,665-2,662 range, progressing towards the $2,627-2,622 confluence. This confluence includes the 100-day Exponential Moving Average (EMA) and a short-term ascending trend line, which should serve as a crucial pivot point for short-term traders.

Conversely, the overnight swing high, situated around the $2,763-2,764 range, appears to present some resistance. Should the Gold price surpass this level, it may seek to challenge the all-time high of approximately $2,790 reached in October. This is closely followed by the $2,800 level, which, if breached, would be perceived as a new catalyst for bullish trades and could facilitate an extension of the recently established uptrend observed over the past month.