At the time of writing, Gold (XAU/USD) has surged to an all-time high of $2,581.75, approaching key intraday resistance as the US trading session kicks off. This rally is fueled by a mix of geopolitical tensions, economic data, and inflationary concerns. Let’s dive into what’s moving the market and what traders should be aware of.
Geopolitical Turbulence: Tariff Threats Add Fuel to the Fire
Markets were shaken by recent comments from former US President Donald Trump, who confirmed a 25% tariff will be imposed on Canadian and Mexican imports—two of the US’s biggest trading partners—starting this weekend. Trump also issued a warning of 100% tariffs on BRICS nations if they proceed with plans to establish a new currency to rival the US Dollar in international trade. This announcement has increased uncertainty and is a potential headwind for Gold, as it could escalate inflation fears through higher consumer and production costs in the US.
Economic Data in Focus: Eyes on PCE Inflation
Today’s key economic data release is the US Personal Consumption Expenditures (PCE) Price Index for December, the Federal Reserve’s preferred inflation measure. Expectations suggest a modest uptick, with core PCE forecasted to rise 0.2% from 0.1% in November and the headline figure increasing by 0.3% compared to the previous month’s 0.1%. These figures will be closely monitored by traders as they could dictate the near-term direction of Gold prices.
Market Movers: What’s Driving Volatility?
- German CPI Decline: Softer inflation readings in Germany are contributing to the broader narrative of slowing global growth, which has supported Gold prices.
- US GDP Miss: A weaker-than-expected preliminary fourth-quarter US GDP reading for 2024 has fueled speculation that the US economy could be slowing down, adding further bullish sentiment to Gold.
- Trump’s BRICS Tariff Threat: Trump’s bold statements on tariffs for BRICS nations are adding an additional layer of uncertainty to global markets. On TruthSocial, he stated: “There is no chance that BRICS will replace the US Dollar in international trade… any country attempting to do so should say hello to tariffs and goodbye to America!”
Technical Analysis: Is There More Room to Run?
Gold surged early Friday, hitting a fresh peak of $2,800.93. But with such strong gains, profit-taking may soon come into play. Tariff threats are generally considered inflationary, which could act as a headwind for further upward movement.
Key Support Levels to Watch:
- $2,721: A significant level, acting as a triple top in November, December, and January before breaking on January 21.
- $2,709: October 23, 2024, low, which serves as secondary support.
- $2,680: If both support levels fail, expect a full-scale sell-off targeting this zone.
Resistance Levels to Keep in Mind:
- $2,800: Analysts have flagged this as an important psychological resistance before the next leg up.
- $2,809 and $2,824: Based on Thursday’s price action, these are critical daily resistance points that traders should monitor.
- Long-Term Target: Many strategists are predicting a possible rally to $3,000 if the bullish momentum continues.
What’s Next for Gold Traders?
Market volatility is expected to remain high as we move into the weekend, with the potential implementation of US tariffs on Canada and Mexico acting as a major catalyst. The upcoming PCE data will either validate the inflation narrative or introduce a potential correction if figures come in lower than expected.
For XAU/USD traders, it’s essential to stay alert to these developments and adjust trading strategies accordingly. Keep an eye on key resistance and support levels, and remember that any surprises on the inflation front could trigger significant price swings.
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