- Gold price falls to near $2,600 after the US Dollar recovers losses and turns positive.
- The US Dollar gains as the Fed signals fewer interest rate cuts for 2025.
- Market experts project the Fed to resume the policy-easing cycle in March.
Gold price (XAU/USD) falls to near the weekly low of $2,600 in Monday’s North American session. The precious metal faces selling pressure as the US Dollar (USD) recovers intraday losses and turns positive, with the US Dollar Index (DXY) returning above 108.00. The higher US Dollar makes the Gold price an expensive bet for market participants.
10-year US Treasury yields tumbled to 4.55% on Monday. Lower yields on interest-bearing assets generally weigh on non-yielding assets, such as Gold, by increasing their opportunity costs. However, the relationship appears positive on Monday.
The outlook of the Gold price appears to be uncertain as the Federal Reserve (Fed) is expected to cut interest rates fewer times in 2025. Fed policymakers have guided smaller number of rate cuts for the next year as they are upbeat on the United States (US) economic growth. Additionally, a slowdown in the disinflation trend and better labor market conditions than what had been anticipated by Fed officials earlier are also responsible for the need for a gradual policy-easing cycle.
The Fed reduced its key borrowing rates by 100 basis points (bps) to the range of 4.25%-4.50% this year and is expected to leave them unchanged in January.
According to analysts at Goldman Sachs, the Fed is expected to deliver its next interest rate cut in March. The firm also expects two more in June and September.
Gold technical analysis
Gold price trades in a Symmetrical Triangle chart formation on a daily timeframe, which exhibits a sharp volatility contraction. The 20-day Exponential Moving Average (EMA) near $2,630 overlaps Gold’s price, suggesting a sideways trend.
The Relative Strength Index (RSI) oscillates in the 40.00-60.00 range, indicating indecisiveness among market participants.
Looking up, the Gold price would strengthen after a decisive break above the December high of $2,726.00. On the contrary, bears would strengthen if the asset breaks below the November low around $2,537.00.
Gold daily chart
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
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