Gold hangs on above key technical point to start the week

It’s a mixed start to the new year for gold but yesterday’s drop was not too bad overall. The precious metal fell as the dollar recovered back some ground alongside bond yields, as Trump denied going soft on tariffs. The good news for gold buyers is that from a technical standpoint, the drop did not take out the 100-day moving average (red line).

The key level is seen at $2,626 currently, with further short-term support seen closer to $2,600 for now.

Historically, January tends to be a stellar month for gold. In fact, it is the best performing month for the precious metal in the last decade.

But again, it is important to look at the background in the run up to January this year. Gold climbed by a staggering 27% in 2024 and that is despite a slight dent seen in November and December trading. It took more than a year for price to dip below the 100-day moving average and even then, we’re seeing above that the break didn’t have legs to it.

It shows that dip buyers are maintaining a strong resolve, at least for the time being.

The caution for gold right now is that the dollar is also keeping rather poised since last month. As Trump continues to work his tariffs agenda and US data continues to support the narrative for the Fed to pause on rate cuts, we will be slowly chewing into the defensive layer of gold buyers. That especially if the bond market continues to play ball as well.

In other words, the January trend for gold might not be a given this time around. The first test will be the US jobs report and its related data during the course of this week.

If there is a meaningful break under $2,600, that could really trigger a very sudden squeeze in gold. If that happens, a quick plunge to test the 200-day moving average (blue line) near $2,500 should not be ruled out.

For now though, we’ll have to see what the data holds.