Gold price declined further on Monday as its safe haven appeal was eroded by improving geopolitical conditions in the Middle East. The metal was down by 0.5% at the time of writing and traded at $2,625 at the spot market, recording a second successive day of losses.
However, gold’s hold above the $2,600 mark is likely to come under increased pressure this week, with news that Donald Trump could be considering placing universal tariffs on specific critical goods. That could mark a drastic shift from a much-publicized plan that could target specific countries like China, Mexico, and Canada.
A universal baseline tariff is viewed as less likely to trigger aggressive responses from affected countries as the proposed tariff hike is between 10%-20%. The country-specific proposal had hikes of up to 100% on some goods.
Gold price is also under pressure following a reported breakthrough in a proposed ceasefire deal between Israel and Hamas. The deal could see Hamas free 34 hostages, making a step closer to a cessation of the war. That could eat into gold’s safe haven demand and potentially drive the price below $2,600 for the first time since late November 2024.
Meanwhile, the latest US macroeconomic data released on Friday has added pressure on gold price. The ISM Purchasing Managers Index (PMI) reading for the manufacturing sector printed out at December printed out at 49.3, beating analysts’ forecast of 48.4. However, increased appetite for the yellow metal by central banks could provide support and propel some gains in the coming days.
Gold price pivots at $2,634 and the momentum indicator calls for further an extended downside if resistance persists at that level. Immediate support is likely to be at $2,615, but a stronger downward momentum could break below that level and test $2,600.
Alternatively, the buyers will take control if the price breaks above $2,634. If that happens, XAUUSD is likely to encounter the next barrier at $2,648. Breaching that level will invalidate the downward thesis and further gains could follow and drive up gold to test $2,658.
This post was last modified on Jan 06, 2025, 14:32 GMT 14:32