Gold price tumbles below 50-day EMA as U.S. dollar hits 3-year high
Gold slips below 50-day EMA as strong U.S. dollar and Fed policies weigh on prices
Gold prices began 2025 with a mixed performance with an initial rally above the 50-day Exponential Moving Average (EMA) before losing momentum, triggering a decline that raised questions about its near-term trajectory.
Gold climbed above the 50-day EMA on the first trading day of the year, buoyed by optimism across markets. However, this rally quickly faltered, leading to a break below the EMA by January 6 during the Asian session. The metal’s decline coincided with the US Dollar Index hitting a three-year high, driven by the Federal Reserve’s hawkish outlook. The central bank’s indication of fewer rate cuts in 2025 has supported the dollar, making gold less attractive by comparison.
Gold price dynamics (November 2024-January 2025). Source: TradingView
Adding to the bearish sentiment, on the 4hr chart, the Relative Strength Index (RSI) also retreated from overbought territory on the daily chart and now trades below the mid-50 level, hinting at further downside pressure.
Gold price forecast: Geopolitical risks and tariff policies signals optimism for gold
Despite the near-term bearish indicators, persistent geopolitical risks remain a key driver of safe-haven demand. The prolonged Russia-Ukraine war and escalating tensions in the Middle East continue to provide a floor for gold prices. Additionally, uncertainty surrounding US President-elect Donald Trump’s tariff policies poses potential headwinds to global trade, lending further support to the metal.
Market participants will turn their focus to the release of the final US Services PMI and Factory Orders data later today. These figures could provide fresh impetus for gold’s next move. Looking ahead, the $2,600 per ounce level serves as a crucial near-term support. A sustained break below this could open the door to deeper losses. On the upside, resistance is capped at the Fibonacci 50% retracement level, marking a critical area for any recovery attempts.
China's anticipated interest rate cut and proactive economic policies for 2025 may bolster global demand for gold. Gold surged above its 50-day EMA hitting a 13-day high at $2,666.
