Gold Price Stuck in Consolidation as Nervousness Mounts Ahead of Trump’s Inauguration

Gold prices have entered a consolidation phase amid heightened market uncertainty and geopolitical shifts as traders brace for President-elect Donald Trump’s inauguration on January 20. As the precious metal holds steady near $2,640, investors are closely monitoring market dynamics and technical indicators to predict the next breakout.

What to Know

• Market Trends: Gold remains in a pennant technical formation, signaling pressure for an impending breakout.
• Geopolitical Developments: Global political changes, including a potential resignation by Canadian Prime Minister Justin Trudeau, add to market volatility.
• Economic Outlook: The Federal Reserve is expected to stay data-dependent, with little chance of an interest rate cut in January.
• Key Levels: Technical analysis points to critical support at $2,606 and resistance near $2,658.

Gold’s Stabilization Amid Geopolitical Shifts

Gold prices (XAU/USD) stabilized at $2,640 on Monday following a surge at the start of 2025, as traders reopened positions trimmed ahead of the holidays. Despite elevated U.S. Treasury yields, which typically weigh on gold, the metal has managed to maintain its footing in a consolidation pattern.

The geopolitical landscape has become a focal point for investors. Italian Prime Minister Giorgia Meloni’s unsanctioned visit to Donald Trump and the potential resignation of Canadian Prime Minister Justin Trudeau are just two of the many developments creating ripples across global markets.

Adding to the uncertainty, Trump is reportedly considering a simplified global tariff approach for critical U.S. imports. These factors, coupled with a packed economic calendar that includes the U.S. Nonfarm Payrolls report, are keeping traders on edge.

Daily Market Movers: What’s Driving Gold

• Fed Policy Expectations: The CME FedWatch tool indicates only a 10% chance of a 25-basis-point rate cut in January. Markets expect the Federal Reserve to remain cautious, especially as Trump’s pro-growth policies are unveiled.
• U.S. Treasury Yields: The 10-year yield hit a seven-month high of 4.639% last week, currently stabilizing near 4.62%. Elevated yields often pressure gold, yet the metal’s consolidation indicates resilience.
• Economic Data: European Purchasing Manager Indexes (PMIs) showed minor improvements in France, Germany, and Spain, signaling a mixed global economic outlook.

Technical Analysis: Consolidation Signals Imminent Breakout

From a technical perspective, gold is trapped within a pennant chart formation, with ascending and descending trendlines converging. This setup indicates that a breakout, either upward or downward, is likely in the near future.

Support Levels:

• • The 100-day Simple Moving Average (SMA) at $2,627 offers immediate support but remains under pressure.
  • The ascending trendline at $2,606 has held firm in previous tests, but a breach could trigger a rapid decline to $2,531.

Resistance Levels:

• • The 55-day SMA at $2,658 is the first resistance level, having already proven its strength twice last week.
  • If $2,658 is breached, the next target is $2,690, where the descending trendline of the pennant formation lies.

Traders are advised to watch these levels closely, as a breakout could dictate the next directional move for gold.

Gold FAQs

Why Do People Invest in Gold?

Gold has long been regarded as a store of value and a hedge against economic uncertainty. During turbulent times, it serves as a safe-haven asset, providing stability in portfolios. Additionally, gold acts as a hedge against inflation and currency depreciation, making it a popular choice for central banks and individual investors alike.

Who Buys the Most Gold?

Central banks are the largest buyers of gold, using it to diversify reserves and strengthen economic stability. In 2022, central banks added 1,136 tonnes of gold to their reserves, marking the highest yearly purchase on record. Emerging economies like China, India, and Turkey have been significant contributors to this trend.

How Is Gold Correlated With Other Assets?

Gold often exhibits an inverse relationship with the U.S. Dollar and Treasury yields. When the dollar weakens, gold prices typically rise, as it becomes more affordable for international buyers. Similarly, gold tends to move in opposition to risk assets like equities, gaining during stock market downturns.

What Influences Gold Prices?

Gold prices are driven by multiple factors, including geopolitical events, economic data, and monetary policy. As a yield-less asset, gold benefits from low-interest-rate environments. However, its most significant influence remains the U.S. Dollar. A strong dollar tends to cap gold’s upside, while a weaker dollar supports price gains.

Geopolitical and Economic Catalysts

The consolidation in gold prices comes as traders assess the potential impact of Trump’s policies. The president-elect’s proposed global tariff plan could influence trade dynamics and spark volatility across financial markets.

Meanwhile, uncertainties surrounding U.S. monetary policy, coupled with mixed global economic signals, add complexity to the outlook for gold. Traders should keep an eye on key events like the U.S. Nonfarm Payrolls report and updates on geopolitical developments.

Gold’s price consolidation reflects a market in flux, with traders weighing geopolitical and economic factors ahead of Trump’s inauguration. While the metal remains range-bound for now, technical indicators suggest that a breakout could be imminent.

For investors, gold continues to offer a compelling safe-haven appeal amid global uncertainty. With critical support and resistance levels in play, the coming weeks could be pivotal for the yellow metal’s trajectory.

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