(Kitco News) – Spot gold has converted the $2629 level from resistance to key support, and the prospect of Trump’s tariffs and renewed inflation combined with the Fed’s slower rate cut path should keep the yellow metal well-positioned for further gains, according to analyst James Hyerczyk at FX Empire.
“Gold prices rose on Thursday, breaching key resistance levels and signaling further upside potential as investors assessed the implications of President-elect Donald Trump’s policies on inflation and Federal Reserve strategy,” Hyerczyk wrote. “Gold crossed above the retracement zone of $2629.13 to $2607.35, turning it into new support.”
“This move positions bullion for a test of the 50-day moving average at $2659.15, with further upside targeting the $2663.51 to $2693.40 retracement zone,” he added.
Hyerczyk said that gold is enjoying renewed support on the back of political and economic uncertainty as the new year begins.
“Investor sentiment remains anchored in expectations that Trump’s proposed tariffs and protectionist trade measures could drive inflation, reinforcing gold’s appeal as a hedge,” he said. “Since mid-November, gold prices have traded within a defined range of $2583.91 to $2726.30, and a breakout is anticipated once clearer signals emerge from the new administration and the Fed’s January 28-29 meeting.”
He added that the Fed’s more cautious approach to rate cuts as inflation has held stubbornly above 2% provides further support for gold prices and said that several factors that drove the yellow metal’s 2024 rally will likely continue.
“In 2024, gold posted a 27% gain, its strongest annual performance since 2010, driven by robust central bank purchases, geopolitical tensions, and a Fed rate-easing cycle,” Hyerczyk wrote. “These factors are expected to persist in 2025, providing a bullish foundation for further price appreciation.”
He noted that treasury yields were also moderating on the first trading day of the new year, and while yields are expected to remain high by historical standards in 2025, the pressure they place on equities should help gold as well.
“The 10-year yield ended 2024 above 4.5%, with choppy movements throughout the year,” Hyerczyk said. “The Fed’s December signals of limited rate cuts in 2025 suggest gold could continue benefiting from a high-rate environment that pressures equity markets.”
The U.S. dollar is also seeing some downward pressure, which Hyerczyk expects will increase over time.
“The dollar weakened slightly to start 2025, with the yen recovering modestly from five-month lows,” he wrote. “Currency markets remain focused on the widening interest rate gap between the U.S. and other economies, driving demand for the greenback. However, a potential slowdown in U.S. growth later in the year could challenge prolonged dollar strength, indirectly supporting gold prices.”
Hyerczyk sees gold well-positioned to challenge resistance at $2659.15 per ounce, followed by the 50-day moving average. “Traders are likely to position cautiously ahead of Trump’s inauguration on January 20 and the Fed’s January meeting,” he concluded. “Inflationary pressures and geopolitical risks continue to favor gold as a safe-haven asset, reinforcing bullish sentiment into the first quarter of 2025.”
Gold has continued to gain during Thursday’s trading, and has already tested key resistance, hitting a high of $2,660.60 shortly after noon EST.
Spot gold last traded at $2,655.35 per ounce for a gain of 1.18% on the session.
