Gold prices rally as market awaits Fed's next move

Gold (XAU/USD) continued its weekly uptrend on Thursday, marking its third consecutive day of gains. The precious metal surged past $2,760 per troy ounce for the first time since early November, fueled by lingering uncertainty surrounding announcements from President Trump, particularly on tariffs.

The US Dollar (USD) regained some of its recently lost appeal, with the US Dollar Index (DXY) rebounding and moving away from multi-week lows. Meanwhile, US Treasury yields showed mixed movements across different maturities.

On the political front, President Trump announced plans to impose tariffs on the European Union, Canada, and Mexico and disclosed that his administration is considering a 10% tariff on imports from China. He justified this move as a response to fentanyl being smuggled into the United States from China via Mexico and Canada.

Economic and Policy Implications for Gold
While gold is traditionally considered a hedge against inflation, analysts caution that Trump's tariff policies could complicate its outlook. If the tariffs spur inflation, the Federal Reserve (Fed) may be compelled to keep interest rates higher for longer, reducing gold's appeal as a non-yielding asset in a high-rate environment.

What's Next for Gold?
Looking ahead, market focus will likely remain on developments from the White House, especially during a week with few major economic data releases. Investors are also gearing up for the Fed meeting on January 28–29, where interest rates are expected to remain within the 4.25%-4.50% range.

Amid escalating political uncertainty and central bank decisions, gold remains a crucial asset to monitor, with potential for further volatility.

Technical Analysis of Gold Prices
A close look at the 4-hour technical chart reveals a persistent uptrend, as gold has broken above the resistance line of its ascending wedge channel. This resistance is now acting as a new support level, indicating the potential for further upside momentum. Technically, a swift breakout above $2,760 and consolidation above $2,763 would likely accelerate the rally. Conversely, if gold breaches its support, it could retest lower levels, such as the $2,723 zone (aligned with the 0.618 Fibonacci retracement level), before resuming its long-term bullish trend.

Trading Strategy
For now, a buying strategy remains favorable. However, always set your Take Profit (TP) and Stop Loss (SL) levels to safeguard your account and mitigate risk. As market conditions evolve, disciplined risk management will be your best ally.