During the European session on Friday, spot gold trended lower, currently trading near $4,920 per ounce. Earlier in the Asian session, it had hit a record high of $4,967.19 per ounce, marking an intraday decline of approximately 0.31%. A shift in attitude from US President Donald Trump regarding Greenland has eased geopolitical tensions, leading to a partial retreat in safe-haven buying and putting downward pressure on the gold price.
President Trump not only revoked threats to impose tariffs on eight European countries but also ruled out the possibility of a forcible takeover of Greenland. This shift generally maintains positive market sentiment and could potentially dampen demand for traditional safe-haven assets. Simultaneously, the US Dollar Index saw a modest rebound, currently trading near 98.45, exerting some pressure on gold. Furthermore, daily charts indicate that gold is in an extremely overbought condition. Combined with optimistic sentiment in global equity markets, this may curb traders' appetite for new bullish bets on safe-haven gold. Against the backdrop of widespread market expectations for the Federal Reserve to implement at least two more interest rate cuts within the year, the US dollar appears unlikely to achieve substantial appreciation. This continues to provide underlying support for the non-yielding asset gold, suggesting that any pullback is more likely to be viewed as a buying opportunity, with potential downside likely limited. A rebounding US dollar and weakening safe-haven demand have prompted gold bulls to temporarily step back. US President Donald Trump revoked threats of tariffs on Europe on Wednesday and announced that a consensus had been reached with NATO on a framework for Greenland's future, news which alleviated market concerns. The US Bureau of Economic Analysis released the final estimate for third-quarter Gross Domestic Product, showing economic growth of 4.4%, slightly better than the previous estimate of 4.3%. This reading was also significantly higher than the previous quarter's growth rate of 3.8%. A separate report showed that the Core Personal Consumption Expenditures Price Index, the Fed's preferred inflation gauge, rose 2.8% year-on-year in November, up from 2.7% the previous month. On a monthly basis, the indicator maintained steady growth, increasing by 0.2%. Additionally, the US Labor Department reported that seasonally adjusted initial jobless claims increased by 1,000 to 210,000 for the week ending January 17th. This figure was below the market consensus of 212,000 but failed to boost confidence among dollar bulls. Investors appear convinced that the Federal Reserve will keep its key interest rate unchanged until at least the end of the current quarter, potentially extending through May when Chairman Jerome Powell's term concludes. However, markets still anticipate the possibility of two more rate cuts in 2026, which continues to weigh on the US dollar. Market focus has now shifted to the two-day Federal Open Market Committee policy meeting commencing next Tuesday. Investors will scour the proceedings for clues regarding the Fed's interest rate cut trajectory, which will be crucial for the dollar's near-term direction and provide significant momentum for non-yielding gold. Extreme overbought conditions on the daily Relative Strength Index are applying pressure, but bullish potential appears to remain. This week's price breakout above the upper boundary of the ascending channel extending from late October is seen as a key catalyst for gold bulls and confirms the recent positive outlook. The Moving Average Convergence Divergence indicator lines are positioned above the signal line, with both above the zero line and the positive histogram continuing to expand, indicating that bullish momentum persists. However, the Relative Strength Index is near 80, signaling that the market is in overbought territory, which could exert downward pressure on prices, even though the breakout pattern still favors a continuation of the upward trend. While underlying fundamental supportive factors remain robust, the overextended technical posture also introduces downside risks—should buying momentum wane, the gold price could retreat towards the lower channel boundary near $4,437. As long as the price holds above the former channel resistance, the overall uptrend is expected to resume following any pullback.
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