Gold rises on safe-haven demand, but market lacks bullish conviction

Gold prices were in the green on Tuesday as uncertainty over US President-elect Donald Trump’s policies increased safe-haven demand for the metal. 

Even though prices were higher and were above the 100-day simple moving average, experts believe that gold prices lack the bullish conviction. 

“Expectations that US President-elect Donald Trump's proposed tariffs and protectionist policies could reignite inflation seem to benefit the commodity's status as a hedge against rising prices,” Haresh Menghani, editor at FXstreet, said in a report. 

At the time of writing, the February gold contract on COMEX was at $2,654.49 per ounce, up 0.3% from the previous close. 

Gold also moved higher as the dollar eased from recent highs, bringing some relief to traders. A softer dollar makes commodities priced in the greenback less expensive for holders of other currencies. 

Trump denies plans for less aggressive tariffs

On Monday, the Washington Post reported that Trump was planning to narrow his tariff plans to target specific sectors. 

Ahead of his inauguration day on January 20, Trump may only impose tariffs on sectors that are critical for national or economic security, according to the report.

However, hours later, Trump denied any such plans and rebuffed the Washington Post report on tariffs. 

There were uncertainties regarding Trump’s plan, which aided safe-haven demand in the gold market, boosting prices. 

After the report, the dollar slid to a one-week low but recouped most of its losses after Trump denied the contents of the report. 

The weakness in the dollar offered some relief to gold prices amid a hawkish outlook in terms of monetary easing by the US Federal Reserve in 2025. 

Gold prices lack of bullish conviction

“The Federal Reserve's hawkish signal that it would slow the pace of rate cuts in 2025, which remains supportive of elevated US Treasury bond yields, acts as a headwind for the non-yielding gold price,” Menghani said. 

Even as safe-haven inflows have propped up prices on Tuesday, traders remained wary of the interest rate outlook in the US. 

The Fed is likely to slow down its rate-cutting cycle this year with only two cuts anticipated compared with four previously. 

Elevated interest rates increase the opportunity cost of holding the yellow metal, which drags down its appeal. 

Menghani added:

Traders also seem reluctant to place aggressive directional bets ahead of this week's release of the FOMC meeting minutes and the crucial US nonfarm payrolls report on Wednesday and Friday, respectively.

Furthermore, Fed Governor Lisa Cook said on Monday that policymakers could be more cautious with further interest rate cuts, citing labor market resilience and still stickier inflation.

Gold prices: technical indicators

Gold prices need to break above the $2,657 per ounce level for bulls to seize near-term control, according to FXstreet. 

Prices are currently trading around $2,656 per ounce level, which may warrant some caution for bearish traders. 

Experts believe that if gold could break above the immediate resistance of $2,681 per ounce, prices could climb to the level of $2,700 an ounce. 

However, the lack of confidence in the market, given the bearish outlook for monetary easing makes things complicated.