- Summary:
- Gold price is under pressure amid rising US bond yields, but safe haven demand could prove the difference heading into the new year.
Gold price returned to the upside on Tuesday, inching up by 0.1% to trade at $2,615 at the spot market at the time of writing. The safe haven metal has been resilient in recent days, staying above the $2,600 mark amid a rebounding US dollar. Donald Trump will be sworn in as the 47th US President on January 20, and his reign is expected to usher a significant shift in US economic policies.
Safe haven demand favours gold price over the dollar
The Federal Reserve lowered interest rates last week, which has added support to gold prices. However, Trump’s impending economic tariffs are likely to heat up the economy and, therefore, keep inflation rates high. That adds support to the Fed’s assertion last week that it targets fewer rate cuts in 2025.
However, the uncertainty surrounding potential retalliatory measures against Trump’s tarrifs could trigger increased safe haven demend for gold. The US President-elect has already stated that he will impose tarrifs against China, Mexico and Canada, and the three nations too have threatened retaliation.
China already signaled its cautious approach to Trump’s policies by purchasing gold for the first time in six months. A contrinuation of the trend could drive up demand for gold and help spur up XAUUSD.
Meanwhile, yields on US treasury bonds have risen and will limit gold price upside. As of this writing, returns on benchmark 10-year bonds were up by 8 basis points to 4.60, putting a strain on non-yielding gold. In view of these developements, gold price will likely trade within narrow margins of $2,600 as markets head to a long holiday.
Gold price prediction
The momentum on gold price favours the upside if the XAUUSD stays above the $2613 pivot. Otherwise the sellers could take control. The first resistance will likely be at $2,620, but a stronger momentum could break above that level and test $2,628.
Alternatively, the momentum will shift to the downside if the price breaks below $2,613. That could see the establishment of initial support at $2,606. Meanwhile, the upside narrative will be invalid if the price breaks below that level. Also a stronger downward momentum could take the price lower and test $2,600.
