- Gold is nearing an all-time high, rising amid volatile US policy data.
- WEF comments Trump eases on Chinese tariffs and advocates lower rates, weighing on the dollar.
- US Dollar Index falls 0.62% to 107.44, weakening gold’s hedging call and strengthening.
Gold price extended weekly gains, ready to challenge the all-time high of $2,790 to some extent. Comments from President of the United States (US) Donald Trump could be the catalyst that pushes the yellow metal higher, although he surprised traders as he may refrain from exercising missions on Chinese products. XAU/USD is trading at $2,772, up 0.60%.
The market mood turned slightly negative even though Trump has toned down his trade policy rhetoric against allies and adversaries. US economic data on Friday hinted that manufacturing activity improved in December, according to S&P Global, while consumer sentiment deteriorated, according to a final University of Michigan (UOM) poll for January.
However, Trump’s harsh rhetoric is not limited to the trade deficit. At the World Economic Forum (WEF) he added that he would demand lower interest rates.
Following his comments, Greenback pulled back and remains on the defensive, as seen by the US Dollar Index (DXY), which tracks the value of the US currency against a basket of six currencies. It converts down 0.62% to 107.44.
PAC is set to end the week with losses of 1.77% in US President Donald Trump’s first week in office.
Next week, the US Economic Docket will showcase standing goods orders, the Federal Reserve’s interest rate (FER) decision, gross domestic product (GDP) numbers and the Fed’s preferred inflation measure, the core personal consumption expenditures (PCE) index.
Daily Digest Market Movers: Gold prices rise above $2,770 on solid US data
- The price of gold rose ignoring the progress of real yields. Measured by 10-year Treasury Inflation Protected Securities (TIPS), the yield sits at 2.23%, up one and a half basis points (BPS).
- 10-year US Treasury notes slide two BPS intraday by 4.625%.
- The December global manufacturing CIO improved from 49.4 to 50.1, above estimates of 49.6. Meanwhile, information services managers dropped from 56.8 to 52.8, missing expectations of 56.5.
- The University of Michigan February Fortho expanded by 71.1, below estimates of 73.2 and a preliminary reading of 74.0.
- Existing home sales in December rose by 2.2%, from 4.15 million to 4.24 million.
- Market participants are pricing in roughly equivalent odds that the Fed will cut rates twice by the end of 2025 with the first cut occurring in June.
XAU/USD Technical Outlook: Gold rises above $2,770 as Bulls target ATH
The gold price rally is set to extend but traders must clear the $2,790 record. Despite this, the formation of a bullish candle with a small upper shadow indicates that traders do not accept rising prices. This was further confirmed by the Relative Strength Index (RSI), which turned distorted.
XAU/USD must surpass the all-time high (ATH) at $2,790 to continue rising. Once cleared, the next resistance will be $2,800, followed by key psychological levels exposed at $2,850 and $2,900.
Conversely, if Bears Drag Bullion prices are below the $2,750 figure, the 50 and 100 day simple moving averages (SMAs) appear as support levels, each at $2,656 and $2,653. If it is broken, the next UP lies the 200-day SMA at $2,520.
Gold FAQ
Gold has played a major role in human history as it has been widely used as a store of value and medium of exchange. Currently, apart from its brilliance and use for jewelry, the precious metal is widely viewed as a safe-haven asset, meaning it is a good investment during turbulent times. Gold is also widely viewed as a hedge against inflation and against currency depreciation because it is not dependent on any specific issuer or government.
Central banks are the largest holders of gold. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and purchase gold to improve the perceived strength of the economy and the currency. High gold reserves can be a source of confidence for a country’s wealth. Central banks added 1,136 tons of gold worth $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest annual purchase since records began. Central banks from emerging economies such as China, India and Turkey are increasing their gold reserves.
Gold has an inverse relationship with the US dollar and the US Treasury, which are major reserve assets and safe haven assets. When the dollar falls, gold tends to rise, allowing investors and central banks to diversify their assets in turbulent times. Gold is inversely correlated with risk assets. A rally in the stock market tends to weaken the price of gold, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession could escalate the price of gold due to its safe haven status. As a lower-yielding asset, gold tends to rise as interest rates fall, while the cost of funds usually rises as the yellow metal rises. However, most of the moves depend on how the US Dollar (USD) behaves as the asset is priced in Dollars (XAU/USD). A stronger dollar tends to keep the price of gold in control, while a weaker dollar is likely to push gold prices higher.
