Gold prices remain stable in the face of market uncertainty and policy concerns, pausing a four-day upward trend during Asian trading on Monday. Trading below $2,700, gold's recent movements reflect a complex interplay of economic factors and geopolitical tensions. While the US economy demonstrates resilience, hawkish expectations from the Federal Reserve (Fed) are fostering a risk-off sentiment across global markets. Meanwhile, the Japanese Yen's safe-haven status gains traction amid potential rate hikes by the Bank of Japan (BoJ).
In recent reports, the US unemployment rate surprisingly fell to 4.1%, reinforcing the country's economic strength and contributing to the persistent strength of the US Dollar. This dollar strength, coupled with a broadly risk-averse market environment, overshadows China's pro-growth measures and robust December trade data.
The gold market has been grappling with several influential factors. The 50-day Simple Moving Average (SMA) aligns with triangle resistance at $2,645, while the 14-day Relative Strength Index (RSI) remains comfortably above the midline, hovering near 60.00. This technical setup indicates a potential for continued price stability in the short term.
The US Dollar has entered a bullish consolidation phase, alongside US Treasury bond yields. Gold prices gyrate in a tight range below the monthly high of $2,698, reached last Friday. Despite strong non-farm payroll (NFP) data supporting hawkish Fed bets, uncertainty surrounding former President Trump's policies weighs heavily on market sentiment.
"Markets have already scaled back expectations for Fed rate cuts to just 27 basis points (bps) for all of 2025, with the terminal level now seen around 4.0% compared to the 3.0% many had hoped for this time last year," – Refinitiv
The imposition of broader US Treasury sanctions on Russian oil supply led to a significant spike in oil prices last Friday, adding another layer of complexity to global financial markets. In China, gold buying activity appears to be on the rise as the Year of the Snake approaches, hinting at increased demand in one of the world's largest gold markets.
In India, however, gold discounts have increased as local consumers abstain from purchases due to a recent surge in prices.
"Gold discounts in India rose this week as consumers refrained from buying as local prices hit a month's high." – Reuters
Despite China's robust trade data for December, the overall market sentiment remains risk-averse. This cautious stance is largely driven by expectations of continued Fed rate hikes and global economic uncertainties.
The ongoing debate over monetary policy continues to influence investor decisions. As the Fed maintains a hawkish outlook amid strong employment figures and inflationary pressures, markets remain on edge. Investors are closely monitoring economic indicators and central bank communications for hints on future policy directions.
The author and FXStreet emphasize that this article is not intended to serve as investment advice, reflecting the publication's commitment to providing objective analysis without influencing individual investment decisions.