Gold prices (XAU/USD) continue to face downward pressure during the European session on Thursday, having broken a three-day winning streak. This comes after reaching their highest levels since early November on Wednesday. The US Dollar (USD) has gained some positive momentum for the second consecutive day, recovering from a monthly low, which, alongside stable equity market performance, has undermined the safe-haven appeal of gold.
Despite the negative bias, expectations that the Federal Reserve will cut interest rates twice this year are keeping US Treasury bond yields in check, which limits the upside for the USD and provides some support for gold prices. Additionally, uncertainty surrounding US President Donald Trump’s trade policies, which could lead to trade wars and heighten market volatility, continues to provide a cushion for gold, limiting potential losses.
USD Strength and Stable Market Conditions Weigh on Gold Prices
The US Dollar remains steady above its lowest level since late December, bolstered by a modest rebound in US Treasury bond yields. This has led to some selling pressure on gold prices. The market’s risk-on sentiment, fueled by the lack of details regarding Trump’s tariff plans and the easing of geopolitical tensions, has further dampened demand for the safe-haven metal.
Trump’s proposed policies are largely seen as inflationary, potentially prompting the Federal Reserve to maintain a more hawkish stance and keep interest rates higher for a longer period to curb inflation. However, investors are still betting on the possibility that the US central bank may reduce borrowing costs at least twice by the end of the year, which would limit the upside for both US bond yields and the US Dollar.
Attention is now focused on Trump’s speech at the World Economic Forum, where any concrete announcements on tariffs could influence market sentiment. Additionally, the release of the US Weekly Jobless Claims report is expected to provide further direction for gold prices.
Technical Outlook: Gold Bulls Hold Key Support Levels
From a technical standpoint, gold prices are likely to find support near the $2,625-$2,620 level, which was previously a strong resistance point. A further decline could bring gold down to the $2,700 mark, and if this level is decisively broken, it may open the door to deeper losses. The next support zone could be around the $2,665-$2,662 area, with additional support near the $2,627-$2,622 confluence, which includes the 100-day Exponential Moving Average (EMA) and a short-term ascending trendline.
On the upside, gold faces resistance around the $2,763-$2,764 level. A breakout above this could set the stage for a challenge of the all-time high around $2,790, followed by the $2,800 mark. If this resistance is overcome, it would signal a continuation of the recent uptrend and potentially lead to further bullish momentum in gold prices.
Market Events to Watch
Looking ahead, the Bank of Japan’s interest rate decision at the end of its two-day policy meeting on Friday is expected to be a key event, with an anticipated hike from 0.25% to 0.50%, the highest level since the 2008 global financial crisis. Additionally, the upcoming rate decisions from the Federal Reserve and European Central Bank next week could inject volatility into the markets and provide fresh impetus for gold prices.
Conclusion
In conclusion, while gold prices are currently experiencing downward pressure due to a modest rebound in the US Dollar and a stable risk-on market environment, key factors such as potential interest rate cuts by the Federal Reserve and uncertainty over Trump’s trade policies may continue to provide support for gold. With important central bank decisions and market events on the horizon, gold traders should remain cautious, as further volatility could either strengthen or challenge the current trend. For now, gold prices are poised between key technical support and resistance levels, suggesting a wait-and-see approach as investors monitor the unfolding economic landscape.