Gold (XAU/USD) has regained some of its recent losses, rising on Monday despite lighter-than-usual trading volumes ahead of the New Year holiday. The precious metal is benefiting from safe-haven demand as markets await signals on the US economy under the incoming Trump administration and the Federal Reserve’s (Fed) interest rate plans for 2025.
Gold’s upward momentum is fueled by concerns over potential tariffs and trade policies from the Trump administration, which could spark trade conflicts and escalate risk aversion sentiment. However, expectations of fewer rate cuts from the Fed in 2025 may limit the upside for the non-yielding metal.
Geopolitical risks, particularly the ongoing Russia-Ukraine conflict and rising tensions in the Middle East, have further supported Gold prices. Over the weekend, Israeli forces launched strikes on hospitals in northern Gaza, killing at least seven people, which has intensified market concerns.
Gold is on track to finish the year with a remarkable 27% gain, marking its best annual performance since 2010. This surge has been driven by central bank purchases, rising geopolitical instability, and the monetary easing policies of major central banks.
US Dollar Weakness Provides Support for Gold
The US Dollar Index (DXY), which tracks the value of the USD against six major currencies, is hovering around 108.00, slightly below its highest level since November 2022. Traders are still adjusting to the Fed’s recent hawkish pivot, with the central bank cutting interest rates by a quarter-point in December. The Fed’s updated projections suggest two rate cuts in 2025, but its cautious outlook for further cuts may continue to pressure the US Dollar, providing support for Gold.
Gold also benefits from a decline in US Treasury yields, with the 2-year and 10-year yields currently at 4.32% and 4.62%, respectively.
In other geopolitical developments, Russia’s Federal Security Service recently thwarted multiple assassination plots by Ukrainian intelligence targeting senior Russian officials. The attempted attacks, which involved bombs disguised as power banks or document folders, underscore the ongoing risks in the region.
Technical Outlook: Gold Tests Key Levels
Gold prices are trading near $2,620 on Monday, consolidating near the nine- and 14-day Exponential Moving Averages (EMAs). The 14-day Relative Strength Index (RSI) is just below the 50 mark, indicating neutral sentiment. A move above 50 on the RSI could suggest growing buying interest.
On the upside, Gold may target the psychological resistance at $2,700, with the next key level at $2,726.34, its monthly high recorded on December 12. On the downside, immediate support is found around the $2,624 to $2,628 range, marked by the nine- and 14-day EMAs. A break below these levels could lead to increased selling pressure, potentially pushing Gold towards its monthly low of $2,583.39.
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