Gold prices surged to their highest level since November 6, driven by escalating trade war anxieties and expectations of further interest rate cuts by the Federal Reserve. The US dollar recovered moderately, while a generally positive risk environment in equity markets capped gold's gains.
Gold price ( XAU/USD ) rallied for the second consecutive day, reaching its highest level since November 6, around $2,726 during the Asian session on Tuesday. This surge was fueled by a combination of factors, including heightened trade war fears and expectations of further interest rate cuts by the Federal Reserve (Fed).
US President Donald Trump's suggestion of imposing tariffs on Canada and Mexico revived concerns about global trade tensions, driving investors towards the traditional safe-haven asset, gold. Additionally, declining US Treasury bond yields, driven by bets that the Fed will lower interest rates twice this year amid signs of cooling inflation, further propelled flows towards the non-yielding yellow metal. The US Dollar (USD) staged a modest recovery from a two-week low touched on Monday, partly due to expectations that Trump's protectionist policies might reignite inflationary pressures and encourage the Fed to maintain a hawkish stance. This, coupled with a generally positive tone in equity markets, somewhat capped the upside for gold prices.Despite these factors, the fundamental outlook for gold remains bullish. The path of least resistance for the XAU/USD appears to be upwards. With no significant US economic data due for release on Tuesday, gold prices are likely to remain sensitive to broader risk sentiment and the dynamics of the US Dollar. The market's attention will be focused on the crucial Bank of Japan policy meeting on January 23-24 and the release of flash PMI prints later in the week, which could provide further insights into the global economic health and potentially influence gold prices.From a technical perspective, gold has found support above the $2,720 supply zone. Oscillators on the daily chart are displaying positive momentum and remain away from the overbought territory, further suggesting that the bullish trend is likely to continue. The next significant resistance level to watch for is around the $2,735 horizontal zone, with potential for further gains towards the $2,746-2,748 region. The momentum could even extend further, challenging the all-time peak of $2,790 reached in October 2024. However, any corrective pullback is expected to find support near the $2,700 mark. A break below this level could lead to further decline towards the $2,662-2,660 region, which could act as a pivotal point for the XAU/USD. Below this level, the price could potentially fall to the $2,635 zone and further towards the $2,622-2,618 confluence.
Gold Price XAU/USD Trade War Federal Reserve Interest Rate Cuts US Dollar Risk Sentiment Commodities
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