Gold Struggles Near $2,700 as US Dollar Strengthens Amid Economic Data and Fed Expectations

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MARKETS TREND

Gold (XAU/USD) is struggling to recover from its bearish trend, staying under pressure around the 2,700 level.

This downward movement seems to be linked to the recent Israel-Hamas ceasefire agreement, which tends to reduce the appeal of safe-haven assets like gold.

At the same time, the US dollar has regained strength as the growing expectation that the Federal Reserve will hold off on cutting interest rates in the near term has helped support the dollar. However, the outlook for softer inflation in the US this year suggests that the Fed may still consider rate cuts later on, which could limit further gains for the USD. This could, in turn, offer some support for gold prices, as the metal is seen as a hedge against inflation and currency fluctuations.

 

XAU/USD

Apart from this, uncertainties about future US trade policies under President-elect Donald Trump, especially regarding tariffs, could keep gold from falling too much. These factors contribute to limiting gold’s losses, even as it faces pressure from other economic forces.

Key points

• Gold struggles near $2,700 as the Israel-Hamas ceasefire weakens safe-haven demand.
• The US Dollar strengthens amid expectations the Fed will pause rate cuts, but soft inflation may still support gold.
• US trade policy uncertainties under Trump could limit gold’s losses.

Rising US Dollar and Economic Data Weigh on Gold Prices

On the US front, the US Dollar is rising this week. This is mainly due to expectations that the Federal Reserve will pause its rate-cutting cycle. The dollar gained strength after recent data showed signs of easing inflation, making it less likely for the Fed to cut rates quickly. However, there’s still a possibility of rate cuts later this year, which is keeping the dollar’s gains limited.

On the data front, there were mixed economic reports. Retail Sales for December rose by 0.4%, and the previous month’s data was revised to show a higher gain of 0.8%. The Philly Fed Manufacturing Index also jumped to 44.3 in January, the highest since April 2021. However, jobless claims increased from 203K to 217K, showing a slight rise in unemployment.

Therefore, the combination of a rising US Dollar and expectations of a pause in rate cuts has caused gold prices to decline, as investors shift away from non-yielding assets. Despite mixed economic data, the outlook for the US economy and Fed policy continues to weigh on gold’s performance.

Gold Technical Outlook: Rising Channel Signals Strength

Gold prices (XAU/USD) are trading at $2,703.15, down 0.35%, reflecting a slight pullback after testing the $2,724.45 pivot point. The yellow metal remains within a rising channel, indicating sustained bullish momentum. Immediate resistance is noted at $2,724.45, with further targets at $2,743.19 and $2,762.69. On the downside, support lies at $2,698.23, followed by deeper levels at $2,682.30 and $2,657.22.

The 50-day EMA at $2,682.30 continues to provide robust short-term support, reinforcing the upward trend. However, the recent rejection at the pivot level signals cautious sentiment, with traders monitoring for confirmation of a breakout. A sustained move above $2,724.45 could signal renewed buying interest, targeting $2,743.19, while a break below $2,698.23 may indicate a deeper correction.

GOLD Price Chart - Source: Tradingview

The broader trend remains bullish as long as prices stay above the 50-day EMA. However, overbought conditions near resistance levels could prompt profit-taking. Market participants should watch key economic data and dollar strength for directional cues.

Key Insights:

  • Gold struggles near $2,724.45 pivot, eyeing $2,743.19 resistance.

  • Support at $2,698.23 and $2,682.30 underpins bullish sentiment.

  • Sustained breakout above $2,724.45 targets further gains; failure risks correction.

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ABOUT THE AUTHOR See More
Arslan Butt
Index & Commodity Analyst
Arslan Butt serves as the Lead Commodities and Indices Analyst, bringing a wealth of expertise to the field. With an MBA in Behavioral Finance and active progress towards a Ph.D., Arslan possesses a deep understanding of market dynamics.His professional journey includes a significant role as a senior analyst at a leading brokerage firm, complementing his extensive experience as a market analyst and day trader. Adept in educating others, Arslan has a commendable track record as an instructor and public speaker.His incisive analyses, particularly within the realms of cryptocurrency and forex markets, are showcased across esteemed financial publications such as ForexCrunch, InsideBitcoins, and EconomyWatch, solidifying his reputation in the financial community.
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