Gold Price Extends Its Consolidative Price Move On Stronger USD, Trade War Fears -

Gold Price Extends Its Consolidative Price Move On Stronger USD, Trade War Fears

Jan 28, 2025Jeremy ParkinsonFinance0

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Gold price struggles to capitalize on the overnight bounce from a multi-day trough.

Rebounding US bond yields revive the USD demand and weigh on the XAU/USD pair.

Trump’s trade tariffs and Fed rate cut bets could lend support to the precious metal.

Gold price (XAU/USD) remains depressed through the early European session on Tuesday amid a modest pickup in the US Treasury bond yields and a solid US Dollar (USD) recovery from over a one-month low. US President Donald Trump’s trade tariff threats spark inflationary concerns and trigger a modest recovery in the US Treasury bond yields. This, in turn, helps revive the USD demand and turns out to be a key factor undermining the bullion.That said, expectations that the Federal Reserve (Fed) will cut interest rates twice by the end of this year could act as a headwind for the US bond yields and the USD. Apart from this, worries about the potential economic fallout from Trump’s protectionist trade policies could limit losses for the safe-haven Gold price. Traders also seem reluctant and might opt to move to the sidelines ahead of a two-day FOMC policy meeting starting this Tuesday.

Gold price struggles to lure buyers amid notable USD demand; downside remains cushioned

US President Donald Trump ordered his Administration to introduce emergency 25% tariffs on Colombian imports, though the duties were put on hold after the latter agreed to unrestricted acceptance of all illegal migrants returned from the US.

Trump said this Tuesday that he would impose tariffs on producers of pharmaceuticals and computer chips soon. I will also place tariffs on aluminum and copper, and will look at steel and other industries for tariffs, Trump added.

This revived fears that Trump’s protectionist stance would reignite inflation and assist the yield on the benchmark 10-year US government bond to move away from over a one-month low, underpinning the US Dollar and weighing on the Gold price.

Trump said last week that he would demand a cut in interest rates. Moreover, the markets are pricing in two 25 basis point interest rate cuts by the Federal Reserve by the end of this year, which might cap the US bond yields and the Greenback.

Traders now look to Tuesday’s US economic docket – featuring Durable Goods Orders, the Conference Board’s Consumer Confidence Index and the Richmond Manufacturing Index – for some impetus during the North American session.

The focus will then shift to the crucial FOMC monetary policy decision on Wednesday, which will play a key role in influencing the USD price dynamics and help determine the next leg of a directional move for the non-yielding yellow metal.

Gold price bulls have the upper hand while above the $2,725-2,720 resistance-turned-support
On Monday, the XAU/USD showed some resilience below the 23.6% Fibonacci retracement level of the December-January positive move. Moreover, oscillators on the daily chart are holding comfortably in positive territory. This, along with the recent breakout through the $2,720-2,725 horizontal barrier, suggests that the path of least resistance for the Gold price is to the upside. Hence, it will be prudent to wait for strong follow-through selling below the overnight swing low, around the $2,730 area, and the $2,725-2,750 resistance-turned-support before positioning for deeper losses. The commodity might then slide to the $2,707-2,705 area, or the 38.2% Fibo. level, before dropping to the 50% Fibo. level, around the $2,684 region.On the flip side, the immediate hurdle is pegged near the $2,755-2,757 zone. This is followed by the overnight swing high, around the $2,772-2,773 region and the $2,786 area, or the highest level since October 2024 touched last Friday and the all-time peak, near the $2,790 zone. Some follow-through buying, leading to a strength beyond the $2,800 mark, will be seen as a fresh trigger for bullish traders and pave the way for an extension of a well-established uptrend witnessed over the past month or so.More By This Author:Japanese Yen Remains Depressed Amid Trump’s Tariff Threats; USD/JPY Holds Above Mid-155.00s EUR/JPY Price Analysis: Pair slides to 162.15 as bearish momentum intensifiesTrump Trade Back In Vogue – Societe Generale