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Market Response to Trump’s Inauguration
Gold prices saw a moderate increase on Monday as market liquidity remained thin following the swearing-in of Donald Trump as the 47th President of the United States. During his inauguration speech, the US dollar experienced a significant dip, reaching a nine-day low, as Trump indicated a shift away from his previously aggressive tariff policies that could potentially lead to inflation and hinder the Federal Reserve’s ability to ease policy. Currently, XAU/USD stands at $2,709, reflecting a 0.27% increase.
National Emergencies on Energy and Immigration
In an effort to overhaul US policies, President Trump declared national emergencies on energy and at the southern border. The energy emergency aims to fill strategic reserves and boost American oil exports, while the immigration policy focuses on repatriating millions of “criminal aliens” to their countries of origin.
Adjustments in Trade Policy
Trump’s speech also suggested a softer stance on trade. An article from The Wall Street Journal highlighted a broad memorandum instructing federal agencies to examine trade policies and assess US trade relations with China, Canada, and Mexico.
US Dollar’s Performance
The US Dollar Index (DXY), which tracks the dollar’s performance against a basket of other currencies, dropped to a nine-day low during Trump’s speech, hitting 107.95 before rebounding to above 108.00. This week, the US economic calendar will feature Initial Jobless Claims data, S&P Global Flash PMIs, and housing statistics.
Key Market Movers
Gold prices were buoyed by the weaker US dollar. Real yields, measured by the 10-year Treasury Inflation-Protected Securities (TIPS) yield, fell by one basis point on Friday, remaining steady at 2.20%. Meanwhile, the US 10-year Treasury bond yield held firm at 4.611%, pausing the upward momentum in gold prices.
Geopolitical risks eased with a ceasefire in the Middle East, highlighted by Hamas releasing three female hostages in exchange for 90 Palestinians held in Israeli prisons. Market participants are anticipating near-even odds that the Federal Reserve will implement two rate cuts by the end of 2025, with the first expected in June.
Technical Outlook for XAU/USD
Gold prices are consolidating above the $2,700 level. However, the December 12 daily high of $2,725 remains unbroken, which would be a key level for buyers aiming to test the psychological $2,750 figure. If these levels are surpassed, gold could target the record high of $2,790, followed by $2,800.
On the downside, if sellers push XAU/USD below $2,700, the first support would be the January 13 swing low of $2,656, followed by the combined support of the 50 and 100-day Simple Moving Averages (SMAs) at $2,642 – $2,644.
