Gold price recovers from 2-day low ahead of upcoming Trump inaugural speech
Gold recovers to $2,705 after dipping to $2,690, resistance at $2,725 caps gains
Gold (XAU/USD) price starts the new week cautiously after dipping to a two-day low of $2,690 per ounce in the Asian session, only to recover quickly to $2,715.
As of the European session, the price is hovering at $2,705, maintaining an uptrend that began in December, when the metal hit a low of $2,585. This positive momentum is due to a number of key factors, with the next major challenge for gold being resistance at $2,725, a level that has consistently limited upside since November 2024.
The recent strength in gold prices is driven largely by market expectations of a potential U.S. Federal Reserve rate cut, possibly twice this year. Signs of easing inflation in the U.S. have fueled speculation that the Fed may shift away from its hawkish stance, which could weaken the U.S. dollar (USD). A softer dollar traditionally supports gold prices, as the metal tends to gain value when the dollar declines.
Gold price dynamics (October 2024-January 2025). Source: TradingView.
Additionally, the daily RSI for gold remains in bullish territory, reinforcing the overall positive momentum. However, the immediate price action suggests that gold is struggling to push past the $2,725 resistance level. This price point has acted as a cap for gold’s price movement in the past several weeks, and it remains a critical hurdle if the metal is to test its all-time high of $2,790.
Geopolitical risks and $2,725 resistance limit gold upside potential
While the macroeconomic backdrop remains favorable for gold, geopolitical factors could pose a challenge to its rally. A potential shift in U.S. foreign policy, with Donald Trump’s possible relaxation of sanctions on Russia to facilitate peace talks regarding Ukraine, could diminish risk-off sentiment that has supported gold prices. Furthermore, traders are likely to adopt a wait-and-see approach ahead of Trump's inaugural speech, which could influence market sentiment.
Gold remains in a robust uptrend, with attention focused on the $2,725 resistance level. A decisive break above this barrier could pave the way for a rally toward the all-time high of $2,790. However, the market’s trajectory will hinge on developments in U.S. monetary policy and geopolitical events, both of which remain critical factors.
Gold prices surged over 1% on January 16, 2025, marking a nearly 4% increase in January. The rally faced resistance at the $2,725 level, which had capped previous gains in late 2024.
