Gold traders remain optimistic about the metal's future despite recent market fluctuations. With a bullish daily technical setup, traders are buying the dips, encouraged by a symmetrical triangle breakout that continues to influence this month's trading dynamics. The precious metal holds firmly above all major daily simple moving averages (SMA), signaling a potentially strong position in the market.
The recent weakening of the US Dollar has been attributed to market optimism surrounding easing tensions in the Middle East. Following a 15-month conflict between Israel and Hamas, a ceasefire was reached on Sunday. As a result, hundreds of trucks carrying aid entered Gaza, marking a significant development in the region. This truce has provided relief to markets, leading investors to shy away from traditional safe havens like the US Dollar, Gold, and US government bonds.
Gold prices recently experienced a corrective decline from monthly highs of $2,725, dipping into early Monday trading. However, the 14-day Relative Strength Index (RSI) remains above the midline at approximately 58, reinforcing the positive outlook for Gold prices. If this correction continues, Gold may test the January 15 low of $2,670. Falling below this level could threaten the 21-day SMA at $2,653.
In the backdrop of these developments, former President Donald Trump is preparing to announce executive orders concerning immigration, energy, and government hiring policies. Additionally, Trump plans to declare a national emergency on the US-Mexico border shortly after his inauguration on Monday. This political maneuvering may have implications for market stability in the coming days.
Meanwhile, expectations surrounding monetary policy changes add another layer of complexity to the economic landscape. Rising bets that the Bank of Japan (BoJ) will hike rates have contributed to recent adjustments in currency pairs amid a steadier US Dollar. In China, speculations suggest a cut in the Reserve Requirement Ratio (RRR) before the Lunar New Year to stimulate economic activity.
The US Federal Reserve is anticipated to execute two interest rate cuts this year, following subdued December inflation data released last week. Such measures are likely aimed at bolstering economic growth and addressing potential slowdowns.