Gold Price Outlook: Probing Under $2,025 Amid Varied Economic and Geopolitical Influences

In recent trading sessions, gold’s value (XAU/USD) has observed a modest ascent for two consecutive days, settling below the $2,025 mark in the Asian markets. This trajectory comes in the wake of unexpectedly robust U.S. economic growth data and indications of decelerating inflation, both contributing to an optimistic scenario for a gradual economic downturn and exerting downward pressure on U.S. Treasury bond yields.

Consequently, the U.S. dollar, despite reaching its zenith since December 13 earlier in the week, remains subdued, favourably impacting the traditionally non-yielding gold.

Moreover, geopolitical tensions, particularly arising from Middle Eastern conflicts, coupled with global economic uncertainties, are underpinning the allure of gold as a safe-haven asset.

Nonetheless, expectations of delayed interest rate cuts by the Federal Reserve and prospective policy easing in 2024 could stabilize the U.S. dollar, necessitating caution among investors considering bullish positions in gold, particularly in anticipation of movements ahead of the U.S. Personal Consumption Expenditures (PCE) Price Index release.

U.S. Inflation Report to Provide Critical Insights

This pivotal U.S. inflation report is anticipated to provide critical insights into the Federal Reserve’s forthcoming policy decisions, thereby significantly influencing short-term U.S. dollar dynamics and the valuation of U.S. dollar-denominated gold.

Investor focus is also gradually shifting towards the upcoming Federal Open Market Committee (FOMC) meeting scheduled for January 30-31. In the interim, XAU/USD is poised to conclude its second consecutive week in negative territory, marking its third weekly decline in the last four.

The benchmark 10-year U.S. Treasury yield continues its retreat from recent peaks, lending additional support to gold prices. Thursday’s data revealed a 3.3% annual growth in the U.S. economy for the fourth quarter of 2023, surpassing the forecasted 2.0%.

The core PCE Price Index remaining constant during the last quarter of the year indicates a softening in inflation pressures, bolstering the likelihood of the U.S. economy evading a recession, despite a spike in initial jobless claims.

Additionally, the static nature of U.S. durable goods orders in December and a slight increase in orders excluding transportation and defence sectors are noteworthy.

The ongoing conflict between Israel and Hamas, with the potential for broader regional escalation, and the anticipated global economic downturn in 2024 are other critical factors providing tailwinds to gold’s status as a safe-haven asset.

Market participants are also closely monitoring the Federal Reserve’s stance on interest rates amidst a resilient domestic economy.

Investors now await the U.S. Personal Consumption Expenditures Price Index for further insights into Federal Reserve policy directions and to ascertain the near-term trajectory for XAU/USD.

Gold Technical Outlook:

Gold’s current stability near $2,020 is defined by a pivotal line at $2,026.968, serving as a potential strategic axis for traders. Resistance levels are identifiable at $2,038.182, $2,050.115, and a more substantial barrier at $2,060.451, each representing points of intensified selling pressure historically.

Conversely, support levels below the pivot point are initially at $2,019.871, followed by $2,015.930, playing critical roles in preventing further price declines.

A breach of these supports may signal growing bearish sentiment, potentially leading to further price reductions.

Gold XAU Live Chart