Gold price update experienced a notable decline on Monday, shedding over 1% during the North American session. This drop coincided with a widespread market sell-off, primarily driven by interest in the Chinese AI company, DeepSeek. Despite the decline in US Treasury bond yields, gold struggled to find upward momentum. At the time of writing, XAU/USD is trading at $2,738 after reaching a daily high of $2,772.
Gold Price Update: Key Factors Behind Decline
Gold Price Declines Due to Profit Booking by Traders
Jim Wyckoff, an analyst at Kitco, highlighted that traders’ profit booking could be the primary driver of gold price update downturn. The launch of DeepSeek’s advanced language model, which is priced competitively compared to US-based AI models, has raised concerns among investors. This development prompted a reassessment of stock valuations within the AI industry, leading to broader market uncertainty.
Weak Chinese Economic Data Impacts Gold Prices
US Treasury bond yields have dropped significantly, with the 10-year yield falling nearly nine basis points (bps) to 4.528%. However, bullion prices have not benefited from this decline, reflecting the complex interplay of market forces.
Weak Chinese Economic Data Impacts Gold Prices
China’s National Bureau of Statistics (NBS) reported that its Services and Manufacturing PMIs have entered contractionary territory. This signals potential global economic slowdowns, adding further pressure on gold prices.
Key Economic Data and Events
This week’s US economic docket is packed with critical data releases and events:
- Chicago Fed National Activity Index – December data suggests the US economy is improving as the index exits negative territory.
- Upcoming Releases – Key updates include US Durable Goods Orders, GDP figures for Q4 2024, and the Federal Reserve’s monetary policy meeting. Additionally, the Fed’s preferred inflation gauge, the Personal Consumption Expenditures (PCE) Price Index, is also due.
These data points could further influence gold’s price movements and overall market sentiment.
Market Movers
US Treasury Yields and the Greenback
The 10-year Treasury Inflation-Protected Securities (TIPS) yield dropped to 2.19%, down by four basis points. Despite this, gold failed to gain traction. Similarly, the US Dollar Index (DXY), which tracks the currency’s value against six others, fell 0.12% to 107.33. Yet, bullion struggled to capitalize on the Greenback’s weakness.
Federal Reserve Rate Expectations
Market participants are anticipating a total of 54 basis points in interest rate cuts by the Federal Reserve by the end of 2025. The first rate reduction is expected in June, shaping market expectations and impacting gold prices.
Technical Outlook for Gold Prices
Gold prices are consolidating below $2,750 as buyers pause before attempting to push prices higher. Key levels to watch include:
- Downside Risks: A pullback below $2,750 may lead to further declines, testing $2,700. A break below this level could target the 50 and 100-day Simple Moving Averages (SMAs) around $2,655-$2,660. If weakness persists, $2,600 could act as a psychological support level.
- Upside Potential: If gold prices breach $2,750, the next resistance levels to watch are $2,790 (record high), followed by $2,800, $2,850, and $2,900.
Conclusion and Additional Resources
Gold’s current price movements highlight the ongoing impact of market turbulence, economic data, and investor sentiment. Traders should closely monitor economic updates and technical levels to anticipate future trends.
For detailed daily updates on gold prices and analysis, visit our Daily Gold Updates section. To stay informed about broader market signals and insights, check out Daily Gold Signal.
