Gold remains depressed amid USD strength; downside seems limited

• Gold price kicks off the new week on a weaker note amid a modest USD recovery. 
• Fed rate cut bets and sliding US bond yields might cap any further USD move up.
• Renewed trade war fears could help limit losses for the safe-haven XAU/USD pair.

Gold price (XAU/USD) maintains its offered tone heading into the European session on Monday and is currently placed around the $2,750 area, down 0.65% for the day. The ongoing retracement slide from the highest level since late October, around the $2,786 region touched on Friday, is sponsored by a goodish US Dollar (USD) recovery from over a one-month low, which is seen undermining the commodity. That said, the fundamental backdrop warrants some caution before placing aggressive bearish bets and positioning for deeper losses. 

US President Donald Trump’s decision to impose tariffs on all imports from Colombia revives trade war fears and tempers investors’ appetite for riskier assets. The global flight to safety, along with the possibility that the Federal Reserve (Fed) would cut interest rates twice by the end of this year, triggers a fresh leg down in the US Treasury bond yields. This, in turn, could keep a lid on any further USD appreciating move and help limit any meaningful corrective pullback in the Gold price, from the vicinity of the all-time peak. 

Gold price remains depressed amid a goodish USD recovery from over one-month low

• The US Dollar, which tracks the Greenback against a basket of currencies, climbs nearly 0.25% amid reviving concerns about US President Donald Trump’s trade policies and prompts some selling around the Gold price on Monday. 
• Trump ordered his Administration to introduce emergency 25% tariffs on all goods coming from Colombia after the Colombian government refused to allow two US military planes carrying deported migrants to land in the country.
• Trump warned that the tariffs will increase to 50% by next week if the Latin American country refuses to comply with his immigration policies, fueling trade war fears and tempering investors’ appetite for riskier assets. 
• Furthermore, the Wall Street Journal (WSJ) reported that momentum is growing among Trump’s advisers to place 25% tariffs on Mexico and Canada as soon as February 1, without waiting for negotiations or talks.
• In the latest development, the White House confirmed on Monday that Colombia has agreed to all of Trump’s terms, including unrestricted acceptance of all illegal aliens from Colombia returned from the US.
• Meanwhile, Trump said last Thursday that he will demand that interest rates drop immediately, lifting bets that the Federal Reserve would lower borrowing costs further in 2025 and dragging the US Treasury bond yields lower.
• This could act as a headwind for the USD and help limit the downside for the XAU/USD, warranting some caution before confirming that the recent positive move witnessed over the past month or so has run out of steam.
• Traders now look to the US economic docket – featuring Durable Goods Orders, the Conference Board’s Consumer Confidence Index and the Richmond Manufacturing Index –  for some impetus later during the US session.

Gold price technical setup favors bullish traders; the $2,736 pivotal support holds the key

Any subsequent slide below the $2,750-2,748 zone is likely to find support near the $2,736 area ahead of the $2,725-2,720 strong resistance breakpoint. The latter should act as a key pivotal point, which if broken might prompt some technical selling and drag the Gold price below the $2,700 mark, towards the next relevant support near the $2,665-2,662 area.

On the flip side, momentum beyond the $2,772-2,773 immediate hurdle should pave the way for a move back towards the all-time peak, around the $2,790 region touched in October. Some follow-through buying, leading to a strength beyond the $2,800 mark, will be seen as a fresh trigger for bullish traders and pave the way for an extension of the positive move.