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Gold Rises Despite Dollar Index Increase

Gold Rises Despite Dollar Index Increase
Youssef Eid

January 21, 2025

Gold faced positive pressure by the week’s opening, providing some positive signals underpinned by some indicators. The Stochastic Oscillator, which explains the aforesaid rise, shows the price is trading above the 50 level on the 4-hour chart, and if the price holds above it, it could reinforce expectations of gold continuing its upward movement throughout the week. Besides, the SMA 9 provides limited signals, with the price hovering around it. Therefore, a 4-hour candle closing above it would be a strong indication of the resumption of the bullish trend.

Currently, gold wavers above the weekly pivot point at $2695, eyeing to cling above it to resume its key bullish trend. The market is awaiting further positive momentum, which could drive additional gains towards $2733. Noticing that this level represents a key pivot point, as it coincides with the upper line of the bullish channel. If gold manages to break through this level and stabilize above it, it could push prices towards $2762.

In the opposite scenario, if gold holds below the pivot point at $2695, it will put the price under negative pressure to start a bearish correction towards the lower line of the channel. If the lower line is broken, it would open the way for further declines to the next target at $2665, followed by $2626 levels.

On the other hand, the markets are closely watching the main decisions from the elected president Donald Trump for his second term, amid growing concerns about his policies that could negatively impact global trade and lead to increased inflation in the U.S. economy. It is expected that he issue several executive orders, including policies related to borders, tariffs, and other important decisions that will affect financial markets.

Furthermore, attention will turn to the service and industrial sector data that will be released in some developed countries, which are expected to draw significant attention in the next days. If this data surpasses expectations, gold prices may decline, as investors may turn away from the yellow metal in search of other investment opportunities. On the other hand, improvements in the service and industrial sectors may reflect a rebound in overall economic activity.

Investors are awaiting the Bank of Japan’s interest rate decision, expected to impact the dollar and gold. Markets anticipate a rate hike to 0.5% from the previous 0.25%. If the data aligns or exceeds expectations, it will strengthen the yen, as higher yields would attract investors, potentially prompting them to buy yen as a safe haven. This would lead to a stronger yen, making it more attractive compared to other currencies. As a result, the U.S. dollar might decline as some investors may shift to yen.