Gold price: Resistance at $2,725 limits further gains despite 4% January rally
Gold climbs 4% in January
Gold prices have held on to a strong start in 2025 after surging over 1% on Thursday, January 16, culminating in nearly 4% increase so far in January.
However, the rally has encountered resistance at the $2,725 level, a barrier that has capped previous attempts for further gains in both November and December 2024. As of Friday’s trading session, Gold has settled around $2,710, holding above the crucial psychological level of $2,700, but still unable to breach the resistance zone.
The outlook for gold is increasingly shaped by broader macroeconomic factors, particularly interest rate expectations. The market is growing more confident that the Federal Reserve will hold off on cutting rates later this month, which could apply downward pressure on gold’s appeal as a non-yielding asset. At the same time, speculation surrounding a potential rate hike by the Bank of Japan next week adds further uncertainty to the price dynamics.
Despite these headwinds, softer inflation data from the US continues to support the notion that the Federal Reserve may cut interest rates later this year. This expectation has contributed to a decline in US Treasury bond yields and a weaker US Dollar, which has helped to spice gold’s ascent.
Gold price dynamics (October 2024-January 2025). Source: TradingView.
Breakout above $2,725 could trigger gold rally towards all-time high
The price surge above $2,700 per ounce caused the Relative Strength Index (RSI) to briefly reach overbought territory, although it has since dipped below that threshold while remaining in bullish territory. This suggests that the momentum could continue, a clear breakout above $2,725 that could see gold challenge its all-time high at $2,790.
Currently, gold remains on track to close out its third consecutive week in the green. For the bulls, the next key level to watch is a sustained break above $2,725, which could trigger a fresh leg of the rally and bring the all-time high within reach. On the other hand, failure to break this resistance could leave gold vulnerable to a pullback, especially if expectations for a Fed rate pause gain traction.
The US Core CPI data came in lower than expected at 0.2% m/m, boosting gold's appeal. Gold prices surged to a five-week high, briefly breaking above the $2,700 per ounce level.
