Gold prices regained upward momentum on Friday, edging closer to three-month highs near $2,760, following a brief consolidation on Thursday. This recovery comes as traders await clarity on US President Donald Trump’s trade policy direction and the release of the S&P Global preliminary US business PMI data.
Trump’s Trade Policies and Global Uncertainty
Gold continues to be supported by its traditional role as a safe-haven asset amid ongoing concerns over global economic uncertainty. Earlier in the week, President Trump announced plans to impose tariffs on imports from Canada, Mexico, China, and the European Union, effective February 1. However, the lack of clarity regarding the specifics of these tariffs has kept market participants on edge, prompting increased demand for gold as a defensive asset.
In addition to the trade tensions, Trump’s recent comments during the World Economic Forum (WEF) virtual speech calling for a weaker US Dollar and lower global interest rates further favor gold. These remarks have created downward pressure on the USD while providing support to non-yielding assets like gold.
Impact of Global PMI Data on Gold Price
Gold traders are closely watching the global preliminary Manufacturing and Services PMI reports for January, which are expected to offer insights into economic conditions in both the US and Europe. Disappointing data could exacerbate fears of a global economic slowdown, especially amid the ongoing trade conflict, which could result in a fresh wave of safe-haven demand for gold.
Bank of Japan’s Influence on USD and Gold
Another key development to watch is the Bank of Japan’s (BoJ) upcoming interest rate decision. A hawkish rate hike by the BoJ could trigger a fresh sell-off in the USD/JPY pair, leading to a further weakening of the US Dollar. This, in turn, could provide additional upside support for gold, which tends to benefit from a weaker USD.
Gold Price Technical Outlook
From a technical perspective, gold remains on track to test its record high of $2,790, which coincides with a symmetrical triangle target of $2,785. The metal’s recent breakout from a symmetrical triangle pattern earlier this month continues to support the bullish outlook. Furthermore, gold is trading comfortably above all key daily simple moving averages (SMA), which is a positive sign for the continuation of the uptrend.
The 14-day Relative Strength Index (RSI) is currently near 69, just below the overbought region, signaling that there is room for further upside without reaching overbought levels. Additionally, the 50-day SMA recently crossed above the 100-day SMA, confirming a Bull Cross, a key technical indicator signaling strength in the market.
Potential Price Levels to Watch
For gold to maintain its bullish trajectory, it must secure a daily close above the November 2024 high of $2,762. A successful breach of this level could pave the way for the next target near $2,790.
In the event of a pullback, the $2,736 level is seen as immediate support, followed by the key psychological level of $2,700. If gold falls below $2,700, the 21-day SMA at $2,678 will be a critical support level to watch for short-term traders.
Conclusion
Gold’s outlook remains favorable, with a strong technical setup and continued safe-haven demand driven by geopolitical uncertainties and potential economic concerns. Traders will be closely monitoring the upcoming US PMI data and any updates on Trump’s trade policies, which could significantly impact the yellow metal’s price in the short term.