Gold Could Break $2,800 If Trump Puts His Proposals Into Action After Inauguration

(January 17, 2025 - Neils Christensen, Kitco News)

(Kitco News) - Stubborn inflation and growing economic uncertainty, as government debt continues to rise, are helping to push gold prices to critical resistance levels above $2,700 an ounce.

Not only is gold looking to end the first full trading week of 2025 at a one-month high, but bullish momentum is picking up even as the U.S. dollar index remains elevated above 109 points. Spot gold last traded at $2,703 an ounce, up 0.51% on the week.

Although gold is seeing solid gains, some analysts note the precious metal still has work to do to break out of its two-month consolidation period. Analysts also note that gold could face challenges next week following President-elect Donald Trump’s inauguration.

Trump’s aggressive comments about using trade tariffs to support the U.S. manufacturing sector continue to bolster the U.S. dollar. However, his comments are also stoking inflation fears and concerns that economic growth could suffer due to a global trade war.

“In the short term, I see $2,725 as key resistance, and one we may struggle to break until we get a clearer picture of Trump's policies and how they may impact the dollar, yields, and the newfound belief in rate cuts,” said Ole Hansen, Head of Commodity Strategy at Saxo Bank. “I will watch news on tariffs and spending, given their importance for economic growth and the fiscal debt situation.”

Although Trump’s new administration is creating a lot of geopolitical angst as the world waits to see what policies he will push in his first few days in office, James Stanley, Senior Market Strategist at Forex.com, said there is one thing he knows Trump won’t do, which will be good for gold.

“Trump is not going to rein in spending. He is not going to balance the budget. He’s not going to be a president of austerity,” he said. “Gold is attracting more attention from investors because they are expecting to see some element of monetary dilution in fiat, global currencies.”

While Stanley is bullish on gold in the near term, he added that he wouldn’t chase it at current levels. He said he continues to prefer buying on dips and waiting to see if $2,700 can hold as support.

Although gold’s performance against the U.S. dollar is impressive in itself, analysts note that the global currency market shows broad-based strength in gold. This past week, gold managed to hit fresh all-time highs against major currencies like the euro, British pound, yuan, Canadian dollar, and Australian dollar.

Jesse Colombo, an independent precious metals analyst and founder of the BubbleBubble Report, said that gold’s gains against other currencies are a precursor for what investors should expect. He added that in the near term, the precious metal has the potential to push to all-time highs above $2,800 an ounce.

He noted that gold’s significant resistance level remains $3,000 an ounce, as many analysts see the precious metal hitting that target in the second half of the year.

“For the past two months, gold has been taking a breather, but now the market has a lot of pent-up energy,” he said. “I’m excited about gold’s potential.”

Colombo said it’s not surprising that gold is doing well ahead of Trump’s inauguration. He pointed out that if the next U.S. president starts a trade war with his proposed tariffs, the global economy will struggle. He explained that consumers around the world will face higher prices and weaker economic activity, creating a stagflationary environment, which is positive for gold.

Although there is significant bullish sentiment in the precious metals market, some analysts note that gold is trading at an important resistance point.

David Morrison, Senior Market Analyst at Trade Nation, said that the last time gold was at this level, prices dropped 5% in a matter of days.

“Last month’s sell-off came despite the daily MACD hovering around ‘neutral,’ so there was no indication that gold was overbought. Today’s daily MACD is higher than back then. Yet it looks more constructive, as it has been gently pushing up in reaction to the steady progress that the gold price has made since hitting its December lows,” Morrison said in a note. “Gold’s bounce and subsequent rally followed the Fed’s ‘hawkish rate hike.’ And since then, it has continued to push higher despite the undoubted strength of the dollar – a perfect illustration that correlations, whether negative or otherwise, don’t always hold.”

Carsten Fritsch, Precious Metals Analyst at Commerzbank, said he expects gold could struggle next week if the U.S. dollar bounces off current support levels.

“It is worth noting that the previous appreciation of the U.S. dollar and the significant rise in yields did not weigh on the gold price. We can therefore speak of an asymmetric market reaction here. Such episodes do not usually last long,” he said in a note. “We are therefore skeptical as to whether the gold price will be able to maintain its high level. This would require a further increase in expectations of interest rate cuts, a weakening of the USD, and a further fall in bond yields.”