- Gold nears all-time high and climbs despite unpredictable US policy remarks.
- Trump’s comments at the WEF soften his stance on Chinese tariffs and argue for lower interest rates, which damage the dollar.
- The US Dollar Index falls 0.62% to 107.44, weakening the Greenback and increasing gold’s hedge attractiveness.
The gold price extended its weekly gains, putting it on track to challenge the all-time high of $2,790 sooner rather than later. Comments by United States (US) President Donald Trump could be the catalyst that propels the yellow metal higher, albeit he stunned traders by indicating that he may not impose tariffs on Chinese exports. The XAU/USD is trading at $2,772, up 0.60%.
Despite Trump’s easing of trade policy rhetoric toward allies and foes, the market attitude swung marginally negative. S&P Global stated on Friday that manufacturing activity improved in December, while consumer sentiment declined, according to the University of Michigan’s (UoM) final January poll.
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However, Trump’s tough rhetoric isn’t only about the trade imbalance. At the World Economic Forum (WEF), he stated that he would want lower interest rates.
Following his statements, the Greenback fell and is on the defensive, according to the US Dollar Index (DXY), which measures the value of the US currency against a basket of six other currencies. It drops 0.62% to 107.44. In the first week of US President Donald Trump’s presidency, the dollar is expected to fall by 1.77%. Next week’s US economic calendar will include the release of Durable Goods Orders, the Federal Reserve’s (Fed) interest rate decision, GDP statistics, and the Fed’s preferred inflation indicator, the Core Personal Consumption Expenditures (PCE) Price Index.
Daily market movers: Gold price rises beyond $2,770 on strong US statistics
- The gold price surged despite the advance in real rates. The 10-year Treasury Inflation-Protected Securities (TIPS) yield is 2.23%, up 1.5 basis points (bps).
- The US 10-year Treasury note rate fell two basis points during the day to 4.625%.
- The US S&P Global Manufacturing PMI for December rose from 49.4 to 50.1, exceeding expectations of 49.6. Meanwhile, the Services PMI slipped from 56.8 to 52.8, missing expectations of 56.5.
- The University of Michigan Consumer Sentiment Final for January increased by 71.1 points, falling short of expectations of 73.2 and the preliminary reading of 74.0.
- Existing home sales in December increased by 2.2% month on month, from 4.15 million to 4.24 million.
- Market investors are putting in near-even odds that the Fed will lower rates twice by the end of 2025, with the first cut coming in June.
XAU/USD technical outlook: Gold soars above $2,770 as bulls target the ATH
The gold price increase is expected to continue, but traders must clear the record high of $2,790. Despite this, the creation of a bullish candle with a short upper shadow shows that traders are resisting higher prices. This is supported by the Relative Strength Index (RSI), which has become overbought.
For the bullish trend to continue, XAU/USD must surpass the all-time high (ATH) at $2,790. Once cleared, the next resistance level would be $2,800, with key psychological levels at $2,850 and $2,900. If bears pull Bullion prices below $2,750, the 50 and 100-day Simple Moving Averages (SMAs) at $2,656 and $2,653 will serve as support levels, respectively. If this level is exceeded, the 200-day SMA at $2,520 will follow.
What determines the price of gold?
A variety of variables might cause price fluctuations. Geopolitical turmoil or worries of a major recession might cause gold prices to skyrocket due to its safe-haven status. Gold, as a yield-less asset, tends to climb in response to decreasing interest rates, but higher interest rates often weigh on the yellow metal. However, because the asset is priced in dollars (XAU/USD), most moves are determined by how the US Dollar (USD) performs. A strong dollar tends to keep gold prices under control, whilst a weaker dollar is likely to drive gold prices upward.
Why do individuals invest in gold?
Gold has played an important part in human history since it has long been utilized as a store of wealth and a medium of trade. Aside from its glitter and use in jewelry, precious metal is now commonly regarded as a safe-haven asset, which means it is a suitable investment during troubled times. Gold is also widely viewed as a hedge against inflation and weakening currencies because it is not tied to any one issuer or government. Gold is important in prop firm technology because it diversifies the asset classes available to traders. Proprietary trading firms that use FX solutions for proprietary firms frequently incorporate gold trading within their platforms, giving traders a powerful tool to hedge against market volatility.
Firms that use prop firm technology can provide seamless access to gold trading, helping its traders to reduce the risks associated with currency devaluation. These FX solutions for proprietary firms allow prop firms to properly manage liquidity while maintaining competitive spreads and transparent pricing for gold and other assets.