Gold Prices Retreat Amid Dollar Strength – Is a Breakout Still on the Horizon?

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MARKETS TREND

Gold prices retreated from a nearly three-month high on Thursday as the U.S. dollar strengthened, prompting investors to book profits while awaiting clearer policy signals from the Trump administration.

The yellow metal, which had been on an upward trajectory amid economic uncertainties, faced resistance around the $2,759 level, a key technical barrier that could determine the next move.

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Gold Prices React to Dollar Strength

Gold spot (XAU/USD) prices eased to $2,752.39, down slightly from recent highs, as the dollar index reclaimed the $108 level. This uptick in the dollar pressured gold, making it more expensive for holders of other currencies. Analysts see this pullback as a technical correction rather than a fundamental shift in sentiment.

 

XAU/USD

“The dollar’s rebound has triggered some profit-taking in gold, but the broader outlook remains bullish,” noted Ajay Kedia, director at Kedia Commodities. He pointed to geopolitical uncertainties and Trump’s proposed tariffs as key factors driving gold demand in the medium term.

Trump’s Trade Policies and Their Potential Impact

Investor focus is now squarely on President Donald Trump’s trade policies, which could have significant implications for inflation and Federal Reserve actions. Trump has signaled a 25% tariff on imports from Canada and Mexico, along with a 10% levy on Chinese goods starting February 1. Further duties on European imports are also on the horizon, though details remain sparse.

According to Ilya Spivak, head of global macro at Tastylive, “If Trump’s policies fuel inflation through tax cuts and tariffs, the Fed may be forced to limit rate cuts, which could put pressure on gold.”

The Federal Reserve is set to meet next week, with markets widely expecting interest rates to remain unchanged. Any hawkish signals from the central bank could further dampen gold’s appeal, as higher rates typically reduce the attractiveness of non-yielding assets.

Technical Outlook and Key Price Levels

From a technical perspective, gold remains within an ascending channel, reinforcing a bullish sentiment. Immediate resistance stands at $2,759.90, with further upside potential toward $2,774.21 and $2,787.83. On the downside, support levels are noted at $2,745.46 and $2,733.24, with the 50-day EMA offering a crucial support zone at $2,731.30.

GOLD Price Chart - Source: Tradingview
GOLD Price Chart – Source: Tradingview

Traders are watching closely for a breakout above resistance, which could accelerate the uptrend, while failure to hold above the $2,733 pivot level may invite selling pressure, pushing prices toward $2,716.98.

Conclusion

Gold’s rally remains intact above $2,733.24, with investors monitoring geopolitical risks and economic data for further direction. The outlook remains cautiously bullish, but strength in the dollar and Fed policy shifts could introduce headwinds.

Key Insights:

  • Gold faces key resistance at $2,759.90; breaking above could trigger gains toward $2,774.21.

  • The 50-day EMA at $2,731.30 acts as a crucial support level for continued bullish momentum.

  • Upcoming Fed decisions and tariff updates are key factors to watch in the near term.

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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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