Gold Hits $2,942 Amid Inflation Concerns – Will It Break $3,000?

Gold(XAU) surged above $2,900 to hit a fresh record at $2,942. Growing demand for gold as a safe-haven asset is pushing it toward the $3,000 mark, and a break above this level could trigger a rally to new highs. However, the price has retraced toward $2,900 as it was overextended in the short term and produced a bearish hammer on the daily chart.

Moreover, the chart below shows that total gold demand is increasing. The gold demand, including OTC investments, increased by 1% year-over-year in Q4 2024, pushing annual demand to a record 4,974 tons. Central banks continued aggressive gold purchases, exceeding 1,000 tons for the third consecutive year. In Q4 2024 alone, they added 333 tons to their reserves, reflecting strong growth. This sustained demand reinforces gold’s position as a key asset amid economic uncertainty created by the tariffs.

On the other hand, inflation expectations and solid economic data suggest the Federal Reserve will delay rate cuts for several months. The chart below shows ISM business surveys indicating continued service sector expansion in January 2025. Moreover, the manufacturing sector recovered, rising above 50% for the first time in 26 months. This could limit gold’s short-term upside, but persistent inflation and central bank demand may continue to support prices.

Ten-year Treasury yields climbed, testing resistance at 4.5% as inflation concerns grew after the US employment data for January. Rising average hourly earnings and increasing consumer inflation expectations suggest the Fed will maintain its current stance. The market is waiting for the inflation data to be released today, setting the next tone for the US dollar index and gold market.

Gold (XAU) Technical Analysis

Gold Daily Chart – Bearish Hammer at $2,942

The daily gold chart shows that the price has reached the target zone of the ascending channel between $2,900 and $3,000, forming a bearish hammer. This pattern suggests that a short-term top may be forming around these levels. Since the RSI is currently in overbought territory, a short-term pullback is likely.

A price correction from these levels could present a buying opportunity for gold investors. However, economic uncertainties stemming from President Trump’s tariffs add to market volatility. Additionally, releasing inflation figures on Wednesday may further drive gold’s rally. A break above $3,000 would open the door for a move toward $3,200.

Gold 4-Hour Chart – Immediate Trend to $3,000

The 4-hour gold chart shows that the price trades within an ascending channel. However, the trade crisis has pushed gold into an immediate trend, forming a second ascending channel. The price was overextended in the short term but has been corrected within the channel. Overbought conditions may lead to a pullback, but any correction will likely be short-lived due to the prevailing uptrend.

Treasury Yields (TNX) Technical Analysis

10-Year Treasury Note Yield Daily Chart – Inverted Head and Shoulders

The daily chart for 10-year Treasury yields shows a strong bullish structure in the form of an inverted head and shoulders. Furthermore, the price has broken the one-year trendline and appears set to move higher. Additionally, the 50-day and 200-day SMAs indicate a strong bullish trend. Therefore, the target for this rally remains 5%.

10-Year Treasury Note Yield 4-Hour Chart – Ascending Channel Pattern

The 4-hour chart for US Treasury yields shows that yields have support at 4.5%. Moreover, consolidation around this level indicates the formation of a bullish pattern. If yields break above 4.70%, it will likely signal a move toward 5%.

US Dollar (DXY) Technical Analysis

UD Dollar Daily – Consolidation and Correction

The daily chart for the US Dollar Index shows that it trades within a volatile zone and consolidates above 107. This consolidation strengthens the bullish outlook. However, a break below 107 could push the index down to 105.60. Tariff concerns from President Trump are adding uncertainties to the US Dollar Index.

US Dollar 4-Hour Chart – Ascending Broadening Wedge

The 4-hour chart for the US Dollar Index shows the formation of an ascending broadening wedge pattern. The index consolidates within a volatile zone and searches for its next direction. A break above 110 will confirm the bullish trend, while a break below 105.60 will negate the bullish outlook.