Analyst explains why gold prices are at ‘a critical juncture’
2025.01.13 09:43
Investing.com — Gold has recently demonstrated a notable ability to withstand the pressures of increasing bond yields and a strengthening US dollar. Despite these headwinds, the metal has managed to post gains for two consecutive weeks.
However, the upward trend in equity markets, which has historically correlated positively with gold, has faltered in recent weeks, raising questions about the future support from haven demand for the precious metal.
In the face of a robust dollar and climbing bond yields, gold has surprisingly rallied. The Dollar Index has continued to rise for seven weeks straight, now testing the 110.00 level, while US bond yields have also surged. The rise in yields is not just a US phenomenon; European and UK government bonds are experiencing similar trends.
According to StoneX analyst Fawad Razaqzada, the recent resilience in gold prices appears to be driven by inflation concerns.
“Typically, a strong dollar and rising yields would pressure gold prices, but investors appear to be hedging against inflation risks. This demand, however, may not be sufficient to push prices to new records in the absence of broader supportive factors,” he wrote.
From a technical standpoint, gold is at a critical juncture, testing key resistance levels near $2690, Razaqzada added.
Should selling pressure resume, support lies around $2650, with further potential declines to $2600, $2530, and $2500. Conversely, a break above the $2710-$2725 resistance zone could signal the possibility of new record highs, although this is not the expected outcome.
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