A perfect storm has swept over the gold market, with several factors supporting price growth.
Geopolitical risk premium. Heightened tensions between Israel and Iran, along with ongoing uncertainty in the Red Sea, keep drawing investors’ attention to safe-haven assets like a moth to a flame.
Institutional demand. Many central banks, China’s and India’s in particular, continue to aggressively boost their gold reserves, driven by fears of sanctions and the dollar’s fragile state.
Escalating confrontation between the White House and the Federal Reserve. The Trump administration's threats against Jerome Powell undermine confidence in the US regulator’s independence, weakening the greenback and fueling interest in the precious metal.
On the flip side, gold appears to be swimming deeply in overbought territory after its prolonged rally. Thus, a technical correction cannot be ruled out. This scenario may materialize under the following circumstances:
1. If the US Consumer Price Index (CPI), due on Tuesday, January 13, surges unexpectedly, it would strengthen the market’s belief in the Fed’s hawkish stance and its determination to maintain high interest rates for a long time. Such an environment is likely to bolster the dollar and pressure bullion prices. Therefore, tomorrow’s US inflation data is of extreme importance to the gold market.
2. American Treasury bond yields are also crucial for the precious metal. If returns on 10-year securities exceed 4.5%, this could dampen gold’s upward momentum.
Hence, while the trend for the asset mostly remains bullish, inflationary pressure may trigger a correction to the previously breached level of $4,500.
The overall recommendation is to sell gold if tomorrow’s CPI data climb above the expected figures. Profits should be taken at the level of $4,500. Stop Loss could be set at $4,620.
The volume of the open position should be calculated so that the potential loss (protected by a Stop Loss order) does not exceed 1% of your deposit. If your account balance does not allow opening a position of this size, it is better to avoid entering the market on this signal and wait for other trade options that meet low-risk criteria.
This content is for informational purposes only and is not intended to be investing advice.
