Gold Forecast: Bullish Pressure Sets the Tone for the Start of the Year

Gold has registered growth of over 1% in recent hours, positioning itself above $2,650 per ounce.
The US Dollar Index (DXY) has fallen for the third consecutive session, reflecting weakness in the U.S. dollar and supporting sustained demand for gold.
China increased purchases for a second consecutive month, reinforcing demand perspectives for gold and fueling bullish pressure.

Weakness in the Dollar

The index that measures the strength of the U.S. dollar (DXY) has fallen for the third consecutive session, stabilizing around the 108-point zone. This weakness stems from uncertainty surrounding the new Trump administration. Recent comments by the president have raised doubts about the aggressiveness of the anticipated tariff plan, fueling indecision and weakening the U.S. dollar.

DXY Index Performance Chart

Source: TVC, TradingView

Meanwhile, the FED maintains its calm stance regarding future interest rate cuts from its current level of 4.5%. However, this neutrality does not seem sufficient to sustain the dollar's strength in the short term, particularly as employment data is expected to be released on Friday.

The sustained weakness of the dollar over recent sessions has been a key factor in gold’s movements, which currently shows bullish pressure with constant demand as the "Greenback" weakens.

Production Cuts

Canadian company Barrick Gold announced this week that it will be forced to temporarily suspend operations at the Loulo-Gounkoto mining complex in Mali due to transportation restrictions that have caused issues since December.

Barrick Gold, the world's second-largest gold producer, owns 80% of the Loulo-Gounkoto mine in Mali. With this new issue, a monthly reduction of approximately 45,000 ounces of gold is expected.

Lower gold production combined with constant demand driven by a weak dollar continues to lay the groundwork for bullish pressure on XAU/USD prices in the short term.

China Purchases

Central Bank of China expanded its gold reserves for a second consecutive month, which could signal more appetite for future purchases through 2025.

The latest data showed an increase in total reserves from 72.96 million troy ounces to 73.29 million in December.

This marks a new era of gold demand by the world's second-largest economy and is helping to reinforce demand perspectives for XAU/USD, leading to solid bullish pressure in the short term when combined with lower production and a weaker American dollar.

Technical Forecast for XAU/USD

Gold had maintained a strong upward trend until its bearish breakout in mid-December 2024 in the $2,600 per troy ounce zone. Currently, the recent upward movement has pushed the price to test the $2,650 level again, casting doubt on the formation of a prolonged bearish move.

Source: StoneX, Tradingview

Lateral Range: Indecision in movements has created a new short-term lateral range between the ceiling of $2,700 and the support at $2,600 for XAU/USD.
- $2,700: Represents the comfort zone for bullish movements over the past month, being respected three times as the strong upward trend attempted to advance. Breaking this level could reignite the previous bullish trend.
- $2,600: Currently acts as the key support for gold movements, halting four bearish attempts over the last two months of trading. It also coincides with the 100-period simple moving average, reinforcing its role as a barrier. Breaking this level could strengthen the outlook for a prolonged bearish move.
If the price remains within this range, it is challenging to adopt a fully bullish or bearish perspective for the upcoming sessions. However, a breakout of the range could define a clearer trend.
ADX: The ADX line of the indicator remains oscillating below the 20 level in the short term, indicating that the average of the last 14 oscillations has been low compared to movements observed before the end of the year. This highlights insufficient volatility to generate a clear trending move in gold for the upcoming sessions and reinforces the lateral behavior. Oscillations above 20 are desirable if the price aims to challenge the $2,700 resistance again.

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