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Gold prices rebound from $2,689 support during the Asian session, driven by safe-haven demand.
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The weakening US Dollar reflects expectations of two Federal Reserve rate cuts in 2025 due to easing US inflation.
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Concerns over President-elect Donald Trump’s trade tariffs further bolster demand for gold above $2,700.
Gold (XAU/USD) prices found support around $2,689 during the Asian session on Monday. The price drop followed last week’s rise to a one-month high but reversed as the US Dollar softened from its recent resistance. The US Dollar’s decline reflects market expectations of two Federal Reserve interest rate cuts in 2025, driven by easing inflation in the United States.
However, gold’s upward momentum may face resistance. The expectations of Trump’s policies fueling inflation could keep the Federal Reserve cautious about aggressive rate cuts, limiting the US Dollar’s decline. Additionally, easing tensions in the Middle East and potential negotiations with Russia over Ukraine create a mixed risk environment. These factors could cap substantial gains in gold prices, despite the weaker US Dollar.
Traders are adopting a cautious approach ahead of key events. Trump’s inaugural speech and Martin Luther King Jr. Day may delay decisive movements in the gold market. While inflation data and dovish Federal Reserve comments support expectations of rate cuts, uncertainties surrounding Trump’s economic policies create a complex outlook. This environment keeps gold price movements balanced between safe-haven demand and cautious optimism.
Trump inauguration and Fed policies shape market outlook
Despite mixed fundamentals, the technical outlook remains bullish, with the price reaching the resistance level of $2,720. The chart below highlights a clear bullish trend in gold prices, characterized by a series of breakout patterns and bullish consolidations. The “base pattern” formed in mid-2023 marked the beginning of the uptrend, followed by a significant breakout above resistance levels. This breakout established the foundation for continued upward momentum, leading to successive bullish consolidations where the price stabilized before moving higher.
The current level near $2,700 suggests the potential for another breakout. Historical price actions show consistent upward movements following consolidations, indicating strong market confidence. The uncertainty near the current level highlights the possibility of varied outcomes. If a breakout occurs, gold could target new highs above $2,800. However, failure to break higher might result in a temporary pullback, testing lower support levels.
Gold trading remains volatile
On the other hand, as volatility increases in financial markets, trading gold has become more challenging. Trading during periods of heavy volatility requires careful risk management and clear trade setups. However, such volatility can also result in significant gains if trades follow strategic decisions. For example, the GoldPredictors day trade shared with members on WhatsApp highlighted a long position entry at $2,672, with a stop loss set at $2,642 and a target of $2,719. This trade is discussed in the chart below and achieved a $47 profit per ounce.
It demonstrates disciplined planning through the use of a predefined stop loss to limit risk and a realistic profit target based on recent resistance levels. To navigate volatility, traders should monitor key support and resistance zones, wait for clear entry signals like pullbacks or breakouts, and avoid over-leveraging. Additionally, setting tight stop losses and taking profits at logical levels helps mitigate the impact of sudden price swings.
Conclusion
In conclusion, gold prices continue to demonstrate strength amid a mix of supportive and limiting factors, reflecting a delicate balance between safe-haven demand and market uncertainty. The bullish trend remains intact, but traders must exercise caution due to potential resistance and volatile conditions. A break above $2,720 is required for gold to sustain upward momentum. However, any price correction could be considered a buying opportunity for gold trades.
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