- On Friday, gold prices attracted buyers for the fourth day in a row amid the flow of some haven funds.
- The Fed's hawkish stance, rising U.S. Treasury yields and strength in the U.S. dollar should limit any gains.
- Traders may also choose to wait for the release of the key US NFP report, which is expected later this Friday.
The gold price (XAU/USD) has been trading with a positive bias for the fourth day in a row on Friday, and is currently just below its nearly four-week high set a day earlier. Uncertainty and geopolitical risks surrounding President-elect Donald Trump's tariff plans continue to weigh on investor sentiment, supporting safe-haven bullion. Moreover, expectations that President Trump's expansionary policies will boost inflation have also proven to be another factor boosting precious metals' status as a hedge against rising prices.
That said, the prospect of a slower pace of rate cuts by the Federal Reserve still supports U.S. Treasury yields rising, helping the U.S. dollar (USD) stabilize near two-year highs. . This, in turn, could be a headwind for low-yielding gold prices, limiting further gains. Traders also appear to be reluctant, choosing to wait for the release of the U.S. Nonfarm Payrolls (NFP) report later in the U.S. session. Nevertheless, the XAU/USD pair maintains its upward trajectory for the second straight week.
Gold prices continue to benefit from President Trump's tariff plans and geopolitical risk concerns
- CNN reported Wednesday that President-elect Donald Trump is considering declaring a national economic emergency to legally justify universal tariffs on allies and adversaries.
- Ukrainian forces reportedly launched a new surprise attack on Kursk in Russia on August 6, advancing in three waves with company-sized attacks supported by armored vehicles.
- The Israeli Defense Forces announced that the commander of Hamas' Sabra Battalion in Gaza City, his deputy, and two elite commanders of Nuhuba Company were killed in a series of airstrikes last week.
- The Fed adopted a more hawkish stance in December, predicting rate cuts of only two quarter points in 2025 as inflation remains high in the world's largest economy.
- Boston Fed President Susan Collins said Thursday that the economy is on a slow and uneven trajectory toward its 2% inflation target and the current outlook calls for patience in cutting interest rates.
- Philadelphia Fed President Patrick Harker said the central bank is expected to cut rates further, but said the path would depend on data and that it would take more time to get inflation back to 2%. .
- Kansas Fed President Jeffrey Schmidt said inflation is on target, growth is strong and the job market remains healthy. Further rate cuts need to be gradual and data-driven.
- Fed Director Michelle Bowman said the current policy stance may not be as restrictive as others see it and that pent-up demand after the election could pose inflation risks.
- President Trump's policies are expected to further stimulate inflation and force the Federal Reserve to cut interest rates more slowly this year, keeping U.S. Treasury yields near multi-month highs hit last week.
- Traders are now anxiously awaiting the release of the US Nonfarm Payrolls (NFP) report. The report is expected to show the economy added 160,000 jobs in December and the unemployment rate held steady at 4.2%.
Gold price could aim for recovery of $2,700 round figure amid bullish technical setup
From a technical perspective, this week's breakout of the $2,665 horizontal resistance was seen as another opening for bullish traders. Given that the oscillator on the daily chart has started gaining positive traction, gold price is poised to move further up to the intermediate hurdle of $2,681-$2,683 and then aim to regain the $2,700 mark. It seems that
Conversely, a decline towards the overnight swing low near $2,655 could be viewed as a buying opportunity. This is followed by support near $2,635, weekly lows near the $2,615-$2,614 zone touched on Monday, and a confluence at $2,600. The latter consists of a 100-day exponential moving average (EMA) and a short-term uptrend line extending from November's monthly low, a decisive break of which shifts the bias in favor of bearish traders.
Gold FAQ
Gold has played an important role in human history as it has been widely used as a store of value and a medium of exchange. Today, apart from their brilliance and use as jewellery, precious metals are widely seen as safe assets, meaning they are considered a good investment in turbulent times. Gold is also widely seen as a hedge against inflation and currency depreciation, as it is not dependent on any particular issuer or government.
Central banks are the largest holders of gold. With the aim of supporting their currencies in times of turmoil, central banks tend to purchase gold to diversify foreign exchange reserves and improve perceptions of economic and currency strength. High gold reserves can be a source of confidence in a country's solvency. Central banks added 1,136 tonnes of gold worth about $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest annual purchase amount since records began. Central banks in emerging countries such as China, India and Türkiye are rapidly increasing their gold reserves.
Gold has an inverse relationship with the US dollar and US Treasuries, which are major reserve and safe haven assets. Gold tends to rise when the dollar falls, allowing investors and central banks to diversify their assets during times of turmoil. Gold is also inversely correlated with risk assets. Rising stock markets tend to push gold prices down, while declines in riskier markets tend to favor the precious metal.
Prices may vary depending on various factors. Geopolitical instability and fears of a deep recession can cause the price of gold to quickly rise from its safe-haven status. Gold, a non-yielding asset, tends to rise when interest rates fall, but rising costs usually put pressure on the yellow metal. Still, most moves will depend on how the US dollar (USD) behaves, as the asset is priced in dollars (XAU/USD). A strong dollar tends to suppress gold prices, while a weak dollar can push gold prices up.
