The upward movement of gold’s price before the season’s holidays, when our last report was published, was abruptly interrupted before the end of the year. Yet the bullish tendencies for gold’s price are again present and despite lots happening on a fundamental level, we have issues which are new. In today’s report we are to discuss the validity of the negative correlation of gold with the USD, geopolitical issues such as Iran and Venezuela and the attack of US President Trump’s government on the Fed. As always we are to conclude the fundamentals with a technical analysis of gold’s daily chart.
- As noted gold’s price is on the rise and has been practically since the start of the year, despite some hiccups. It should be noted that so has the USD Index which measures the reaction of the USD against a basket of its counterparts in the FX market, with today being an exception. Hence despite the negative corelation being adapted today the rest of the week both trading instruments have been in a parallel course, disproving the validity of a negative correlation of the two trading instruments. Also we note the recent rise of US bond yields and note that despite rising the failed to attract investment flows from gold towards US bonds.
- The rally of gold’s price today may have been instigated primarily by the attack of US President Trump’s Government on the Fed. The US Department of Justice (DoJ) over the weekend subpoenaed Fed Chairman Powell over comments he stated at a US Congress hearing, regarding the building renovation of the Fed. It should be noted that DoJ also has threatened with a criminal indictment, escalating the situation further. The action by US President Trump is considered as an intensification of his efforts to increase his influence over the Fed. It is well known that the US President wishes the bank’s rates to drop severely, yet given the relevant resilience of inflationary pressures in the US economy so for, the central bank has not proceeded with dramatic cuts. The stakes are high on the issue given that the independence of the Fed is endangered by US President Trump’s actions and any further escalation of tensions could provide additional support for gold’s price should a strengthening of Trump’s argumentation emerge.
- Please note that the US employment market seems to have been somewhat more resilient in the past month given the drop of the unemployment rate and the release of the US CPI rates for December tomorrow Tuesday is to provide another piece of the puzzle. Should the rates show that the resilience of inflationary pressures in the US economy continues, we may see gold’s price retreating as it could ease the market’s expectations for the Fed to continue cutting rates.
Last but not least, we also note the geopolitical developments surrounding gold. Firstly we note the extraction of Venezuelan President Maduro by the US and his replacement by Venezuela’s Vice President Rodríguez. There seems to be some willingness between the US and Venezuela to find a new modus vivendi and the market has largely priced in the developments, yet we still note that any escalation could provide fresh safe haven inflows for gold. The second issue we highlight are the ongoing protests in Iran.
The possibility of toppling of the current Iranian theocratic regime, raises substantial uncertainty for the future not only of Iran but the region of the Middle East as a whole. Should we see uncertainty about the future of Iran being enhanced further, for example a possible toppling of the current Iranian Government without a political solution in sight, we may see increased safe haven demand for gold and vice versa.
Gold Technical analysis
Gold’s price in today’s Asian session, rallied, breaching the 4545 (S1) resistance line, now turned to support, thus reaching new All Time High (ATH) levels. We maintain a bullish outlook for the precious metal’s direction, given that the upward trendline guiding it since the last day of 2025 remains intact. We also note that the 20 moving average (MA, blue line), as well as the 100 MA (green line) and the 200 MA (orange line), all point upwards supporting the upward direction of gold’s price action. Also the RSI indicator has reached the reading of 70, implying a strong bullish market sentiment for gold’s price, supporting our bullish outlook.
Yet we also have to note that the bullion’s price action has reached the upper Bollinger band, which in turn may slow down the bulls or even cause a correction lower. Should the bulls maintain control as expected, we may see the shiny metal’s price breaching the 4650 (R1) resistance line and start aiming for the 4800 (R2) resistance level.
Should the bears take over, we may see gold’s price reversing course breaking the 4545 (S1) support line, continue lower breaking the prementioned upward trendline in a first signal of an interruption of the upward movement and continue lower to break also the 4375 (S2) support base with the next possible target for the bears being set at the 4240 (S3) support barrier.
XAU/USD Daily Chart
- Support: 4545 (S1), 4375 (S2), 4240 (S3)
- Resistance: 4650 (R1), 4800 (R2), 5000 (R3)