Gold prices are taking a pause, trading near $2,930 early Friday after two consecutive days of impressive gains. Despite this brief consolidation, gold remains on track to register its seventh consecutive weekly gain, largely driven by developments related to US President Donald Trump’s tariff updates and expectations that the US Federal Reserve (Fed) may continue its easing path this year.
Key Factors Driving Gold Prices
US Inflation Data: Both the January US Consumer Price Index (CPI) and the Producer Price Index (PPI) surprised markets to the upside, signaling inflationary pressures. However, certain components of the PPI data showed signs of cooling, reinforcing dovish expectations around the Fed’s rate cut prospects.
Fed Easing Expectations: Following the release of the PPI data, US rate futures priced in 31 basis points (bps) of easing this year, up from 27 bps on Wednesday, with the next rate cut likely expected at either the October or December Fed meeting. This shift in expectations led to a sharp sell-off in US Treasury bond yields and the US Dollar, benefiting non-yielding assets like gold.
Trump’s Tariffs: The narrative that Trump’s reciprocal tariffs plan is being worked on, though not to be imposed immediately, relieved some pressure from global stocks and weakened demand for the US dollar. This, in turn, supported gold prices.
Despite news about potential Russia-Ukraine peace talks, the market’s focus remained on the US inflation data and Trump’s tariff policy, with traders largely ignoring the peace talks narrative for now.
Profit-Taking Risk: While gold has enjoyed a record rally this week, there’s a risk of profit-taking in the near term, especially as traders look to cash in on their positions heading into a long weekend. Fresh developments regarding Trump’s tariffs and broader market sentiment will continue to influence gold prices in the short term.
Key Economic Data Ahead: The upcoming release of US Retail Sales data will be crucial, as it could provide further clues about the Fed’s policy direction and influence the strength of the US dollar, which in turn would impact gold prices.
Gold Price Technical Analysis: The daily chart suggests that gold could pull back briefly toward the rising trendline support around $2,892. The 14-day Relative Strength Index (RSI) has flattened out, remaining in the overbought territory, signaling that a correction could be near.
Support Levels: If selling pressure intensifies, gold could face further declines toward the psychological $2,850 mark.
Resistance Levels: On the upside, if gold regains its upward momentum, the next target will be the record high of $2,943, followed by the key psychological level of $3,000.
Outlook: Gold prices face the potential for a short-term pullback as traders look to take profits, but the broader trend remains positive due to ongoing uncertainties surrounding US tariffs and inflationary pressures. Key data points, including US Retail Sales, will provide fresh guidance for the market’s next move.
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