Gold clings on to $2,700 ahead of Trump’s inauguration

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• Gold price turns flat in European trading after a downbeat Asian session on Monday. 

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• US markets are closed, though traders brace for an eventful week ahead. 

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• Gold holds on to $2,700 while red lights are flashing for more downturn. 

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Gold’s price (XAU/USD) trades flat and holds around $2,700 on Monday after an earlier decline during the Asian session as traders are concerned over President-elect Donald Trump being sworn in as the 47th United States (US) President later in the day. Traders are assessing what to do in their Bullion positioning with concerns about Trump's policies, including tariffs and immigration, which could boost Gold's value as a haven but also lift the US Dollar (USD). Heightened political and trade uncertainties and geopolitical tensions fueled the recent gains in Gold.

Meanwhile, a minority group of bond traders believe the Federal Reserve's (Fed) next move on interest rates will be to increase them instead of a rate cut as most market participants anticipate, Bloomberg reports. Based on options linked to the Secured Overnight Financing Rate (SOFR), those traders see about a 25% chance that the Fed’s next move will be to lift rates by year-end, according to an analysis by Bloomberg Intelligence. That would be disaster news for Gold, which, in normal conditions, has an inverse correlation with yields. 

Daily digest market movers: Outright bets are growing against consensus 

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• State Street Global Advisors, one of the world’s largest investors, says Gold prices could reach $3,100 an ounce this year, extending the 2024 rally that pushed the precious metal to its biggest annual gain in 14 years, Financial Review reported. 

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• The recent Commitment of Traders (COT) publication from the Commodity Futures Trading Commission (CFTC) reveals that hedge fund managers have boosted their net long Gold and Silver calls to a 5-week high, according to Reuters. 

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• In the Middle East, a ceasefire in the Gaza region has begun taking hold as Hamas released three female hostages in exchange for 90 Palestinians held in Israeli prisons, Reuters reports. 

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Technical Analysis: Difficulties ahead due to uncertainty

Gold will be on a path of uncertainty in the coming days and weeks. A large number of instructions and directives are set to be released once President-elect Donald Trump is sworn in as the 47th President on Monday. The main tailwind is that quite a few of the outlined instructions are inflationary or could trigger geopolitical uncertainty, which, in both cases, is not beneficial for Gold. 

There is quite some downside risk, with no key pivotal levels nearby. If traders cannot keep the Gold price above $2,700, they should consider the downward-slopping trendline of the broken pennant chart pattern last week at  $2,669 as the next support. In case more downside occurs, the 55-day Simple Moving Average (SMA) at $2,647 is next, followed by the 100-day SMA at $2,644. 

Looking up, the $2,708 level needs to be regained before considering further upside. Further up, the next level to look at is $2,721, a sort of double top in November and December. In case Bullion powers through that level, the all-time high of $2,790 is the key upside barrier. 

XAU/USD: Daily Chart