Gold Price Forecast: XAU/USD attracts some sellers below $2,700, eyes on Trump's inauguration
- Gold price declines to around $2,695 in Monday’s early Asian session.
- The firmer Greenback undermines the USD-denominated Gold price.
- The uncertainty and elevated geopolitical tensions could boost the Gold price, a traditional safe-haven asset.
Gold price (XAU/USD) extends its decline to near $2,695 during the early Asian session on Monday. The stronger US Dollar (USD) broadly ahead of President-elect Donald Trump’s inauguration exerts some selling pressure on the yellow metal.
Analysts expect the gold price to face volatility before Trump takes office. Traders will closely watch the developments surrounding potential trade policies. Any of Trump's aggressive comments about using trade tariffs to support the US manufacturing sector could lift the Greenback and weigh on the USD-denominated commodity price.
However, the softer-than-expected US inflation data last week could support the precious metal as it might trigger the speculation of more than a single rate cut from the US Federal Reserve (Fed). Traders await Trump's inauguration on Monday for fresh catalysts about executive orders that he plans to issue after he is sworn into office. "The uncertainty in regard to the policies that President Trump is going to put in place has been one of the supportive factors for gold," said David Meger, director of metals trading at High Ridge Futures.
Additionally, the persistent geopolitical tensions in the Middle East and the ongoing Russia-Ukraine conflicts could boost the safe-haven flows, benefiting the Gold price. The Guardian reported that the Russian military took control of two more settlements in eastern Ukraine’s Donetsk region on Saturday, the latest in a series of gains it has reported in its steady advance westward.
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
Author
Lallalit Srijandorn
FXStreet
Lallalit Srijandorn is a Parisian at heart. She has lived in France since 2019 and now becomes a digital entrepreneur based in Paris and Bangkok.
