Gold (XAU) starts 2025 positively, rising above $2,660 on Friday. Safe-haven demand, driven by geopolitical tensions, supports gold prices. The price rally is also fueled by central bank gold purchases, with 694 tonnes bought in the first nine months of 2024. Market expectations of continued central bank demand could push gold to all-time highs in 2025. The upcoming US ISM manufacturing data on Friday will further drive gold prices.
On the other hand, the US dollar remains strong, supported by the Federal Reserve’s slower-than-expected pace of rate cuts. While the Fed lowered rates in December, it signalled a cautious approach to further easing in 2025. Additionally, expected policies under Trump’s administration, such as higher tariffs and tax cuts, could increase inflationary pressures, benefiting gold as a hedge. However, the US dollar’s strength could cap gold’s upside, as a strong dollar often reduces international demand for the metal.
Unemployment claims in the U.S. fell by 9,000 to 211,000 last week, marking their lowest since March. The four-week average dropped to 223,250, reflecting strong job security. The total number of Americans receiving unemployment benefits decreased by 52,000 to 1.84 million, the lowest since September. The US dollar pushed higher within its bullish trend, breaking above 109 following the release of employment claims data. However, Friday’s upcoming ISM manufacturing data will provide further direction for the US dollar. The market is waiting for the Nonfarm payroll data next week, which will provide further clues about the policy decision in 2025. Meanwhile, US Treasury yields remain strong and approach the key resistance zone of 4.64%–4.75% as markets await the next move.
The daily chart for gold shows that the price is trading within a symmetrical triangle, awaiting its next direction. The first day of 2025 was strong, with the price rebounding from the triangle’s support. The price is challenging the 50-day SMA and looks strong. However, a break above a symmetrical triangle is required for further upside. The RSI breaks the mid-level as the price approaches the 50-day SMA, signalling bullish momentum. A breakout above $2,720 is essential to sustain the upward trend in the gold market.
The 4-hour chart for the gold market shows that the price trades within a symmetrical triangle while forming a bullish pattern at its support. Positive price action around $2,580 and a break above $2,630 could pave the way for targets at $2,680 and $2,720. Conversely, a break below $2,580 may lead to further downside before the next upward move begins.
The daily chart for the US Treasury note yield shows that it has formed an inverted head-and-shoulders pattern and broken above the trendline at 4.40%. Following the breakout, the yield has tested the resistance at 4.62% and has been consolidating below this level for the past few days. A strong resistance zone exists between 4.62% and 4.70%. A break above this zone could pave the way for further upside.
The 4-hour chart for the US Treasury note yield shows that it trades within an ascending channel and approaches 4.70%, within the channel’s resistance zone. The RSI suggests that a correction from this level will likely find support at the mid-level, where the next upward move is expected to begin.
The daily chart for the US Dollar Index shows that it has broken the key level 107 and remains strong. The index continues to rise after the New Year holidays, maintaining bullish momentum. The formation of a bullish hammer at the 105.60 support level suggests that the index is likely to move higher. While the RSI is approaching overbought levels, the upward momentum remains strong, indicating further upside potential in the short term.
The 4-hour chart for the US Dollar Index shows that it trades within an ascending channel. The index has formed an inverted head-and-shoulders pattern along with bullish price action within the channel, indicating upward momentum in the short term.
Muhammad Umair, PhD is a financial markets analyst, founder and president of the website Gold Predictors, and investor who focuses on the forex and precious metals markets. He employs his technical background to challenge the prevalent assumptions and profit from misconceptions.