29 Jan 2025

• Gold price consolidates in a narrow band on Wednesday amid mixed fundamental cues.
• A positive risk tone caps the XAU/USD, though sliding US bond yields lend some support.
• Traders also seem reluctant to place directional bets ahead of the FOMC policy decision.
• Gold price (XAU/USD) is finding it challenging to build on the gains achieved the previous day, currently trading with a slight negative inclination just above the $2,760 mark during the Asian trading session on Wednesday. The overall positive sentiment in the equity markets is perceived as a significant factor hindering the performance of this safe-haven asset. Nevertheless, the potential for further decline appears constrained due to a recent drop in US Treasury bond yields, which limits the recovery of the US Dollar (USD) from its lowest point in over a month and provides support to the non-yielding yellow metal.
• Concerns regarding US President Donald Trump's tariff strategies may help mitigate losses in the Gold price, particularly in the context of a weak US Dollar (USD). Traders are likely to adopt a cautious approach, choosing to remain on the sidelines as they await the results of a significant central bank event—the conclusion of a two-day FOMC monetary policy meeting. The Federal Reserve's interest rate projections will be crucial in shaping the short-term dynamics of the USD and in guiding the subsequent directional movement of the precious metal.

Gold price is underpinned by a positive risk tone; downside potential seems limited

Calmer conditions in global markets have reduced the demand for traditional safe-haven assets, hindering Gold's ability to capitalize on Tuesday's positive movement in anticipation of significant central bank events. The yield on the benchmark 10-year US government bond remains near a one-month low, which limits the overnight recovery of the US Dollar and serves as a supportive factor for the non-yielding yellow metal.

Investor apprehension persists regarding the potential economic repercussions of US President Donald Trump's proposed tariffs on imported computer chips, pharmaceuticals, aluminum, steel, and copper. This initiative, intended to encourage domestic production, could instigate a new wave of global trade conflicts, potentially benefiting the safe-haven precious metal.

Data released on Tuesday by the US Census Bureau indicated a 2.2% decline in Durable Goods Orders for December, contrasting with a 2% decrease in November and market expectations of a 0.8% increase. Additionally, the Conference Board reported a drop in the Consumer Confidence Index to 104.1 in January, down from 109.5 the previous month, with the Present Situation Index also declining to 134.3.

Meanwhile, market attention remains fixed on the Federal Reserve's policy decision during its first meeting of the year, which is expected to influence US Dollar demand and provide new momentum for the XAU/USD.

Gold price bulls have the upper hand while above the $2,720-2,725 resistance breakpoint

Calmer conditions in global markets have reduced the demand for traditional safe-haven assets, hindering Gold's ability to capitalize on Tuesday's positive movement in anticipation of significant central bank events. The yield on the benchmark 10-year US government bond remains near a one-month low, which limits the overnight recovery of the US Dollar and serves as a supportive factor for the non-yielding yellow metal.

Investor apprehension persists regarding the potential economic repercussions of US President Donald Trump's proposed tariffs on imported computer chips, pharmaceuticals, aluminum, steel, and copper. This initiative, intended to encourage domestic production, could instigate a new wave of global trade conflicts, potentially benefiting the safe-haven precious metal.

Data released on Tuesday by the US Census Bureau indicated a 2.2% decline in Durable Goods Orders for December, contrasting with a 2% decrease in November and market expectations of a 0.8% increase. Additionally, the Conference Board reported a drop in the Consumer Confidence Index to 104.1 in January, down from 109.5 the previous month, with the Present Situation Index also declining to 134.3.

Meanwhile, market attention remains fixed on the Federal Reserve's policy decision during its first meeting of the year, which is expected to influence US Dollar demand and provide new momentum for the XAU/USD.