On Monday, with trading volumes lighter than normal ahead of the New Year holiday, the gold price (XAU/USD) claws back losses from the previous session. The precious metal is buoyed by a surge in risk aversion as markets look ahead to the incoming Trump administration’s impact on the US economy and the Federal Reserve’s (Fed) 2025 interest rate plans.
The potential for trade conflicts sparked by the new administration’s tariff and trade policies could further fuel demand for gold as a safe haven. However, the Fed’s indication of fewer rate cuts in 2025 may limit how high the non-yielding gold can climb. Geopolitical tensions, too, are lending support to gold. The ongoing Russia-Ukraine conflict and the intensifying Middle East situation, like the Israeli attacks on two hospitals in northern Gaza on Sunday that left at least seven dead and many critically injured, keep the safe-haven appeal of gold alive.
Gold is set to close the year with a remarkable 27% gain, its strongest annual performance since 2010, driven by central bank purchases, geopolitical jolts, and major central banks’ monetary easing.
The US dollar is relatively subdued, with the US Dollar Index (DXY) trading around 108.00, just below its late 2022 high. Traders are still processing the Fed’s hawkish December pivot, where it cut rates by a quarter point but projected only two rate cuts for next year. As US Treasury bond yields decline on Monday, with 2-year and 10-year yields at 4.32% and 4.62% respectively, the non-interest-bearing gold stands to gain.
Adding to geopolitical unrest, Russia’s Federal Security Service said on Thursday it had foiled multiple assassination attempts by Ukrainian intelligence against high-ranking Russian officers and their families in Moscow, using bombs disguised as power banks or document folders.
The Fed’s more cautious stance on future rate cuts in 2025 underscores uncertainties tied to the Trump administration’s economic strategies.
Technical Analysis: Gold’s Consolidation Near Key Levels
Gold is trading near $2,620.00 on Monday. On the daily chart, it’s in a consolidation phase, hovering around the nine- and 14-day Exponential Moving Averages (EMAs). The 14-day Relative Strength Index (RSI) sits just below 50, indicating a neutral market sentiment. A break above 50 could spark more buying.
Resistance-wise, the XAU/USD pair could aim for the psychological $2,700.00 mark, with the next hurdle being the December 12 monthly high of $2,726.34. On the downside, immediate support lies around the nine- and 14-day EMAs, at $2,624.00 and $2,628.00 respectively. A break below these levels might intensify selling, potentially sending gold towards its monthly low of $2,583.39.
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