Gold prices were little changed on Monday as traders awaited the inauguration speech of President-elect Donald Trump later today.
“The US Dollar (USD) kicks off the new week on a softer note and erodes a part of Friday’s positive move amid bets that the Federal Reserve (Fed) will cut interest rates twice this year amid signs of abating inflation in the US,” Haresh Menghani, editor at FXstreet, said in a report.
This, along with uncertainty over US President-elect Donald Trump’s tariff plans, lifts the safe-haven precious metal back above the $2,700 mark in the last hour.
Traders were anticipating to get some clues about Trump’s policies during the inauguration speech later on Monday. Gold prices could be volatile as Trump begins his second term as the US president.
At the time of writing, the February gold contract on COMEX was largely steady at $2,748.31 per ounce.
Trump 2.0: traders brace for volatility
Gold traders are preparing for a period of heightened volatility as President Trump embarks on his second term in office.
The President’s forthcoming policy announcements are expected to have a significant impact on market dynamics, and traders are positioning themselves accordingly.
Gold, often seen as a safe-haven asset in times of economic uncertainty, has recently seen its price stabilize near a one-month high.
This price stability has been attributed in part to subdued US inflation data, which has led to speculation that the Federal Reserve may cut interest rates in the near future.
The current market sentiment is being shaped by a complex interplay of factors, including potential policy changes from the Trump administration and the Federal Reserve’s monetary policy.
Some analysts suggest that a strong and decisive start to Trump’s second term could bolster the US dollar, which could in turn put downward pressure on gold prices.
Conversely, a more gradual and measured approach from the administration could weaken the dollar, potentially leading to an increase in gold prices.
Fed’s rate cut uncertainty
“Interest rate expectations have recently come back into focus. Following the lower-than-expected US inflation data, the market is again pricing in slightly more Fed rate cuts,” Carsten Fritsch, commodity analyst at Commerzbank AG, said.
If the Fed decides to cut interest rates, it could weaken the dollar and make gold more attractive to investors.
On the other hand, if the Fed maintains its current interest rate policy or raises rates, it could strengthen the dollar and put downward pressure on gold prices.
In addition to these factors, geopolitical tensions, global economic growth, and investor sentiment can all impact gold prices. As such, gold traders are closely monitoring developments in these areas and adjusting their strategies accordingly.
Gold’s rally has been tempered after Israel and Hamas agreed to a ceasefire agreement, which could dampen demand for safe-haven assets.
Menghani said:
Traders might also refrain from placing aggressive directional bets ahead of Trump’s inaugural address later this Monday and a US holiday in observance of Martin Luther King Jr. Day.
Can gold prices hit $2,800?
Analysts at FXstreet said gold prices could climb further if the yellow metal decisively breach the $2,725 per ounce mark.
At present prices are around $2,750 per ounce, and the immediate resistance was $2,762.
“The XAU/USD might eventually aim towards challenging the all-time peak, around the $2,790 region touched in October 2024,” Menghani added.
Source: FXstreet
However, the key was today’s speech by Trump, which is likely to shape both commodity and financial markets.
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