Gold Price Forecast: XAU/USD down as Trump 2.0 unfolds

Gold price has extended its corrective decline from monthly highs of $2,725 into early Monday. Traders will continue to cash in on their Gold-long positions heading into US President-elect Donald Trump’s inauguration and amid a Martin Luther King Jr. Day holiday in the US.

Gold price risks volatile trading  

Alongside profit-taking, several other factors remain at work and contribute to the latest leg down in Gold price, primarily the easing of geopolitical tensions in the Middle East. A 15-month-long relentless war between Israel and Hamas culminated in a ceasefire on Sunday as hundreds of trucks carrying aid entered Gaza on the first day.

In the first phase of the ceasefire deal, the Palestinian militant group released the first three Israeli women hostages in exchange for 90 Palestinian prisoners and detainees held by Israelis. Markets cheer the progress on the truce deal, giving up safe havens such as the US Dollar (USD), Gold and US government bonds, which has helped put a mild bid under US Treasury bond yields.

Meanwhile, the Wall Street Journal (WSJ) reported the leaks that Trump is preparing to issue executive orders on immigration, energy and government hiring policies soon while declaring a national emergency on the US-Mexico border within hours of being sworn in on Monday. However, the report on these leaks does not mention tariffs, which could also be one of the reasons behind the risk-on market profile.

Moreover, increased expectations that China will cut the Reserve Requirement Ratio (RRR) before the Lunar New Year, following a no change to its Loan Prime Rate (LPR), add to the upbeat market mood. China is the world’s biggest Gold consumer, and any Chinese stimulus efforts coming through could benefit the non-yielding Gold price. 

However, the Gold price downside could remain cushioned as markets now expect the US Federal Reserve (Fed) to deliver two interest rate cuts this year, in the face of the tame December inflation data released last week. 

Looking ahead, Gold price remains exposed to two-way volatile price action, with the moves likely to be exaggerated by the holiday-thinned market conditions and the speculations surrounding Trump’s 'day one' executive orders.

Gold price technical analysis: Daily chart

The short-term technical outlook suggests that Gold price could extend the pullback before fresh buying resurfaces at lower levels.

This month’s symmetrical triangle breakout remains in play, while the yellow metal holds well above all the major daily simple moving averages (SMA), supporting the bullish case.

The 14-day Relative Strength Index (RSI) holds above the midline, currently near 58, adding credence to the positive Gold price outlook.

Gold price eyes acceptance above the key static resistance at $2,726 to extend the uptrend toward the $2,750 psychological barrier. The next target is aligned at the record high of $2,790.

If the correction gathers strength, Gold price could test the January 15 low of $2,670, below which the 21-day SMA at $2,653 will be threatened.

Additional declines will challenge the powerful support area at $2,745, where the 50-day SMA, 100-SMA and the triangle convergence coincide.