Gold price (XAU/USD) began the first trading week of 2025 with a decline, dropping to around $2,633 on Monday. This dip follows an initial surge as traders quickly reopened positions trimmed during the holiday season. Despite strong US yields, gold’s recent movement reflects heightened geopolitical developments, including debates over new US tariff policies. This article dives into the market’s response, key global events, and technical analysis for gold prices.
US Tariff Developments and Gold Price Reaction
On Monday, news emerged about potential tariff simplifications under President-elect Donald Trump’s administration. Initial speculation suggested a universal tariff on critical imports, but these claims were later dismissed by Trump himself. Instead, he reaffirmed the implementation of tariffs in their originally planned form.
This uncertainty has contributed to gold’s downward movement, as markets brace for clearer signals. Notably, gold’s consolidation aligns with broader global events, such as Italian Prime Minister Giorgia Meloni’s independent visit to Trump and reports of Canadian Prime Minister Justin Trudeau’s potential resignation.
Key Market Drivers This Week
- US Economic Data: Markets are gearing up for a busy week with the US Nonfarm Payrolls report as a focal point.
- Treasury Yields: The US 10-year yield, which hit 4.639% last week, softened slightly to 4.57% on Monday amid tariff-related news.
- European Economic Indicators: Services PMIs from major European economies like France, Germany, and Spain showed slight improvements, boosting investor sentiment.
- Federal Reserve Outlook: The CME FedWatch tool suggests only a 10% chance of a rate cut in January, reflecting the Fed’s data-dependent stance as inflation trends remain uncertain.
Gold Price Technical Analysis
Gold prices remain confined within a pennant chart pattern, indicating a potential breakout soon. Buyers and sellers are nearing a tipping point as the ascending and descending trendlines converge.
- Support Levels:
- The 100-day Simple Moving Average (SMA) at $2,627 is providing temporary support.
- If this level fails, gold could drop to $2,606, with a further decline to $2,531 as a possible outcome.
- Resistance Levels:
- The 55-day SMA at $2,658 remains the immediate challenge.
- A successful breakout could see gold testing $2,690, aligning with the upper trendline of the pennant pattern.
Conclusion
Gold prices face pressure from evolving US tariff discussions and global market dynamics. While technical indicators highlight potential price movements, upcoming economic data and geopolitical developments will likely steer market sentiment. Traders should monitor these factors closely for insights.
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