Gold (XAU) Price Forecast: 50-Day Moving Average to Dictate Early 2025 Trends

Gold Faces Headwinds from Rising Dollar and Treasury Yields

Since October 1, gold (XAU/USD) has faced mounting pressure as the U.S. Dollar Index (DXY) and 10-year Treasury yields surge higher. Despite an initial rally in early November, gold struggled to maintain upward momentum, encountering resistance near the $2726.30 level. This pattern reflects broader market dynamics driven by rising yields and dollar strength.

Treasury Yields Surge, Weighing on Gold

The 10-year Treasury yield (US10Y) has climbed sharply from early October lows near 3.599%, peaking at 4.631% in late December. This upward movement signals persistent inflation concerns and waning expectations of aggressive rate cuts by the Federal Reserve. Higher yields increase the opportunity cost of holding gold, applying downward pressure on prices. Currently, yields are hovering around 4.573%, with support at 4.493%. A break above 4.631% could reinforce bearish sentiment for gold.

Dollar Strength Challenges Gold Bulls

The U.S. Dollar Index has mirrored the movement of Treasury yields, rebounding from 100.157 in early October to a recent high of 108.541. The DXY breached key resistance at 107.587 and is approaching the critical 109.534 level. As the dollar strengthens, gold becomes more expensive for international buyers, limiting upside potential. Sustained dollar strength will likely continue to suppress gold’s performance in the near term.

Gold’s Rally Stalls Below Key Resistance

Gold’s price action reflects its struggle to break through significant resistance. After reaching $2790.17 in late October, gold prices retreated to $2536.85 by mid-November. Since then, gold has traded within a tight range between $2536.85 and $2721.42, with the 50-day moving average acting as a ceiling at $2661.29. The 200-day moving average, positioned at $2485.95, remains a critical support level, reinforcing the downside risk if the current range breaks lower.

Key Support and Resistance Levels to Watch

Gold’s price is consolidating below the 50-day moving average at $2661.29, which has been a key resistance level since mid-December. Until gold decisively clears this point, upside momentum is likely to remain capped.

Immediate resistance stands at $2630.51, representing the upper boundary of recent price action. A break above $2661.29 would open the door for a move toward $2693.40, followed by $2726.30 – the December swing high.

On the downside, gold finds initial support at $2583.91. A break below this level could lead to further declines toward $2536.85, the November low. If selling intensifies, the 200-day moving average at $2485.95 provides the next significant area of support.

Outlook – Will Gold Break or Hold?

With Treasury yields elevated and the dollar holding firm, gold is likely to face continued pressure. If the 10-year yield rises above 4.631% or the dollar breaches the 109.534 level, gold could see deeper declines. However, if yields ease and the dollar retraces, gold may regain strength, testing the $2661.29 mark and potentially $2726.30.

For now, the outlook leans bearish unless clear signs of softening yields or dollar weakness emerge. Gold’s performance hinges on developments in the bond market and currency trends, making these factors essential for traders moving forward.