Gold prices experienced a dip late in the North American session but are still on track to finish the week with a gain of over 0.40%. The precious metal is under pressure as the US Dollar strengthens, but geopolitical uncertainties continue to support gold as a safe-haven investment. As of Friday, XAU/USD was trading at $2,701, down 0.44%.
Market participants are closely watching political developments, particularly the upcoming inauguration of US President-elect Donald Trump. Despite a lack of upward momentum in gold prices, investors have continued to buy into the metal due to concerns over political instability and economic uncertainty in the United States.
The US economic data released this week showed a mixed picture. Housing starts surged by 15.8% month-over-month in December, although building permits fell slightly by 0.7%. Despite these figures, gold barely reacted to the news, as other data, including a solid retail sales report on Thursday, indicated a strong economy.
Meanwhile, the US Dollar Index (DXY), which tracks the dollar against a basket of six major currencies, rose by 0.35% to 109.34. The strengthening dollar has created headwinds for gold, making the precious metal more expensive for holders of other currencies.
In other news, China’s economy is projected to grow by 5% in 2024, according to data released by the National Bureau of Statistics.
On the Federal Reserve front, Governor Christopher Waller suggested that the central bank could consider lowering borrowing costs sooner if the disinflation process continues. Market participants are now pricing in a near-even chance that the Fed will cut rates twice by the end of 2025, with the first reduction potentially occurring in June. The US economic calendar for next week will feature the Presidential Inauguration, as well as key data releases, including Initial Jobless Claims and Flash PMIs.
Market Movers: Gold Faces Pressure Ahead of Weekend
Gold prices came under pressure on Friday as real yields remained firm. The yield on the 10-year Treasury Inflation-Protected Securities (TIPS) was virtually unchanged at 2.18%, while the US 10-year Treasury bond yield remained steady at 4.618%. These yields are seen as a headwind for gold, which does not offer interest or yield.
US Housing Starts showed a significant increase in December, jumping from 1.294 million to 1.499 million. However, Building Permits for the same period declined slightly, dipping from 1.493 million to 1.483 million.
The latest inflation data and Waller’s comments contributed to pressure on the US Dollar, as traders grew increasingly confident that the Fed could cut rates sooner than expected. Waller indicated that inflation is approaching the Fed’s 2% target and did not rule out a rate cut in March.
Gold Technical Outlook: Holding Above $2,700
Gold prices are facing a lack of fresh catalysts ahead of the weekend. However, the key support level for gold remains at $2,700. If prices hold above this level, there is potential for the metal to rise towards the December 12 high of $2,726. A break above this resistance could push prices to $2,750, with the all-time high of $2,790 as the next target.
Conversely, if gold fails to maintain the $2,700 level, it could test the January 13 swing low of $2,656. Further downside could lead to a move towards the confluence of the 50 and 100-day Simple Moving Averages (SMAs) in the $2,639-$2,642 range.
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