08 Jan 2025

Gold prices have experienced a positive trend for the second consecutive day, bolstered by a variety of factors. Concerns regarding trade wars and geopolitical tensions provide support for the XAU/USD, particularly in light of a slight decline in the US dollar. However, the Federal Reserve's hawkish position and high US bond yields may limit further gains as the market anticipates the release of the FOMC Minutes.

Gold prices (XAU/USD) are experiencing some dip-buying interest following a pullback from the $2,665 resistance level observed the previous day; however, there is a noticeable absence of follow-through or strong bullish sentiment. The bulls in the US Dollar (USD) market are adopting a cautious stance, choosing to await the release of the FOMC meeting Minutes before making new investments. Additionally, the prevailing uncertainty regarding US President-elect Donald Trump's tariff strategies, concerns over trade conflicts, geopolitical tensions, and a generally softer risk appetite are significant factors providing support for the safe-haven asset.

Simultaneously, the Federal Reserve's (Fed) indication of a more measured approach to rate cuts in 2025 continues to bolster US Treasury bond yields. This development is likely to support the USD and deter traders from making aggressive bullish moves in the non-yielding Gold market. Therefore, it would be wise to wait for a sustained breakthrough above the $2,665 level before considering positioning for a continuation of the upward trend that has persisted for over two weeks. Nonetheless, the current fundamental environment suggests that bearish traders should exercise caution.

Gold price attracts some haven flows; Fed's hawkish stance might cap gains

US Treasury bond yields and the US Dollar experienced a significant increase on Tuesday, following robust economic data that reinforced market anticipations of a deceleration in the Federal Reserve's rate-cutting strategy this year. The Institute for Supply Management disclosed that its Non-Manufacturing Purchasing Managers' Index (PMI) climbed to 54.1 in December, with the Prices Paid component reaching its highest level in nearly two years. Additionally, the Job Openings and Labor Turnover Survey (JOLTS) indicated an unexpected rise in job openings, which increased to 8.098 million at the end of November, up from 7.839 million previously. This data suggests a resilient US economy, bolstering expectations for fewer rate cuts by the Fed in 2025, and propelling the yield on the benchmark 10-year US government bond to its highest point since April. Atlanta Fed President Raphael Bostic emphasized the need for the central bank to exercise caution in its policy decisions, given the uneven progress in reducing inflation, advocating for a preference to maintain elevated rates. Meanwhile, US President-elect Donald Trump refuted a Washington Post report suggesting that his administration would adopt a less aggressive tariff approach, particularly targeting sectors vital to US national or economic security. Trump also alluded to the possibility of military action should Israeli captives in Gaza not be released before his inauguration, heightening the risk of escalating geopolitical tensions in the Middle East. Traders are now anticipating Wednesday's US economic releases, which will include the ADP report on private-sector employment and the usual Weekly Initial Jobless Claims, for potential short-term trading opportunities. However, the primary focus remains on the FOMC meeting Minutes

Gold price needs to surpass $2,665 barrier for bulls to seize near-term control

From a technical standpoint, the $2,665 horizontal level has now established itself as a significant immediate resistance. With oscillators on the daily chart beginning to show positive momentum, a sustained move above this resistance is likely to act as a new catalyst for bullish activity, potentially leading to further price increases. This upward movement could subsequently elevate the Gold price towards an intermediate resistance level in the $2,681-2,683 range, ultimately aiming for the $2,700 threshold.

Conversely, a decline below the $2,635 level may encounter support near the weekly swing low, approximately in the $2,615-2,614 area reached on Monday. Following this, the $2,600 level presents a confluence of support, including the 100-day Exponential Moving Average (EMA) and a short-term ascending trend line originating from the November low. A decisive breach below this support could reveal the December swing low around the $2,583 mark, which, if surpassed, would alter the near-term outlook in favor of bearish traders.