Gold Price Analysis — January 25

Gold (XAU/USD) traded on a slightly bearish tone in the early European session on Monday and was last spotted trading around the $1850 area.

The yellow metal failed to capitalize on the previous session’s rebound from the $1832 level but instead resumed a bearish decline in the new week. The drop got sponsored by an uptick in the US dollar (DXY), which tends to undermine the dollar-denominated commodity.

Despite growing fears about a potential economic fallout across the globe due to the ever-increasing number of COVID-19 cases, the market mood remains bolstered by optimism for a massive US fiscal stimulus aid. Investors have been pricing in the potential effects of the $1.9 trillion stimulus plan, intended to revive the economy under the Biden administration.

Meanwhile, the prospects of additional fiscal spending in 2021, coupled with the prevailing risk-on market mood, pushed the US Treasury bond yields higher. A blossoming US bond yield is another factor thwarting demand for the non-yielding commodity. That said, a weaker greenback has extended a little support and prevented any sharp decline for gold, at least in the meantime.

Considering the absence of any market-moving economic releases from the US today, the broader market risk sentiment will continue to dictate the dynamics around the XAU/USD.

Gold (XAU) Value Forecast — January 25

XAU/USD Major Bias: Sideways

Supply Levels: $1860, $1875, and $1890

Demand Levels: $1840, $1832, and $1825

Gold finally broke above the strong $1860 resistance on Wednesday last week but went into consolidation below $1875 before losing bullish steam and dropping back below the $1860 line. That said, the commodity needs to reclaim its stance above the $1860 line in the near-term or risks further declines.

That said, we could see a descent in the gold price to the $1840-32 area in the coming days. How price reacts to this possible decline will determine gold’s next sustained move.

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