Gold prices have attracted some dip-buying near the $2,689 mark, following a fresh wave of US Dollar (USD) weakness. However, the precious metal lacks follow-through and remains below a one-month high as of the first half of the European session. A broadly positive tone in equity markets has emerged as a key factor limiting gold’s momentum, as investors increasingly believe the Federal Reserve (Fed) will pause its rate-cutting cycle later this month.
Traders are now holding off on making any decisive moves, waiting for US President-elect Donald Trump’s inaugural address later today for new market signals. Meanwhile, the ongoing US bank holiday in observance of Martin Luther King Jr. Day further dampens market activity. Despite expectations that the Fed may cut rates twice this year in response to easing inflationary pressures in the US, the US Dollar (USD) has failed to build on its Friday gains, which has allowed the non-yielding gold to remain supported.
Lack of Direction for Gold Amid Mixed Economic Signals
Gold has posted gains for the third consecutive week, largely driven by expectations that the Fed may cut interest rates further in 2025. This sentiment was bolstered by recent data, including the US Producer Price Index (PPI) and Consumer Price Index (CPI) for December, which pointed to a slowdown in inflation. In addition, comments from Fed Governor Christopher Waller last Thursday indicated that inflation may continue to ease, creating room for the central bank to cut rates more quickly than expected.
However, despite these supportive factors for gold, the US Dollar has struggled to capitalize on recent positive moves. Concerns surrounding the potential for disruptive trade tariffs from President-elect Trump, coupled with geopolitical developments such as the Israel-Hamas ceasefire, have kept gold in demand as a safe-haven asset. There is also growing optimism that Trump may ease sanctions on Russia in exchange for a deal to resolve the Ukraine conflict, which has helped foster a positive risk sentiment.
Technical Outlook
From a technical standpoint, any upward movement in gold prices could face resistance near the $2,715 level, just below the $2,724-2,725 region, which marked a one-month high last Thursday. If bullish momentum continues, further gains could push gold towards the $2,745 area and potentially towards the $2,760-2,762 zone. Longer-term, the metal may aim for a test of the all-time high around $2,790 set in October 2024.
Conversely, a significant drop below the immediate support zone of $2,700-2,690 could present a buying opportunity. In this case, further declines may find support near the $2,662 region, with additional support from a short-term ascending trendline and the 100-day Exponential Moving Average (EMA) near $2,635. If gold falls below this critical level, a deeper pullback toward the $2,620-2,615 range could follow.
