Gold (XAU) Price Forecast: Will Trump’s Policy Announcements Ignite a New Gold Rally?

Gold Prices Steady Ahead of Trump Inauguration with Market Eyes on Inflation and Fed Policy

Gold prices remained steady last week as traders prepared for Donald Trump’s inauguration on Monday, an event expected to introduce significant policy changes. These potential shifts could affect inflation, interest rates, and the U.S. dollar, reinforcing gold’s appeal as a safe-haven asset. Market participants are closely monitoring developments for their impact on the broader economic environment.

Last week, XAU/USD settled at $2703.15, up $13.78 or +0.51%.

Fed Policy and Inflation Expectations in Focus

Easing inflation data has strengthened expectations of a dovish Federal Reserve stance, which typically supports gold. The Consumer Price Index (CPI) posted a modest 0.2% monthly increase, while core inflation came in below forecasts.

Federal Reserve Governor Christopher Waller added to this sentiment by highlighting the possibility of multiple rate cuts if inflation continues to cool. Futures markets are pricing in nearly even odds of two rate cuts before the end of the year. These expectations weaken the dollar and reduce the opportunity cost of holding gold, boosting its attractiveness to global investors​​​.

Impact of Trump’s Policies on Inflation and Gold

Trump’s proposed fiscal and trade policies, including tariffs on imports, are expected to create inflationary pressures. Tariffs could drive up consumer prices, complicating the Federal Reserve’s decisions on interest rates. Trump’s agenda, which features tax cuts and infrastructure spending, also raises concerns about increased fiscal deficits and heightened inflation. These factors enhance gold’s role as an inflation hedge during periods of economic uncertainty​​.

Treasury Yields and Dollar Performance Influence Gold

Gold’s recent resilience has been supported by a decline in Treasury yields, with the 10-year yield falling 13 basis points this week. A weaker U.S. dollar has further bolstered the metal’s appeal, particularly for foreign buyers. However, positive retail sales data or a strong labor market could counter these trends, leading to a rebound in the dollar and higher yields, which may weigh on gold prices​​.

Market Forecast: Gold Positioned for Further Gains

Gold remains well-positioned for additional upside, backed by dovish monetary policy expectations and robust safe-haven demand. Key resistance lies at $2,726.30, and a move above this level could trigger a rally toward the all-time high of $2,790.17. On the downside, $2,663.51 offers critical support, with a breach potentially signaling a pullback.

Traders should monitor Trump’s policy announcements and upcoming economic reports, as these will heavily influence inflation expectations, the dollar, and interest rate trends. In an environment of fiscal and monetary uncertainty, gold’s safe-haven appeal remains firmly intact​​​.

More Information in our Economic Calendar.