Weekly Outlook: Gold Set for Volatile Moves

January 18, 2025 (MLN): The USD was under pressure and held its weakness against other major currencies throughout the week. 

The market saw the purchase of US Dollars and the sale of commodities and other currencies on Friday, late in the weekend. The action may have been motivated by the prospect of Trump's inauguration on Monday. 

The US Dollar rose as a result of his remarks that trade tariffs should be used to help the country's manufacturing industry. 

Although the new administration's position on trade tariffs is unknown, the reaction of trading partners may result in more difficult trading conditions because some nations have stated that they will retaliate against higher tariffs. Volatility will result from any unanticipated surprises. 

On the other hand, US inflation figures indicated a slowdown. I don't think policymakers would cut interest rates anytime soon, even while some Fed members favoured it. Instead, they will wait until June to do so. Once again, the market has moved from a single rate drop anticipated earlier this year to two. 

On the other hand, if Trump places strict import tariffs, it might result in stronger economic growth and higher inflation. 

The policy decision from the Bank of Japan, which is anticipated on Friday, is another significant event this week. 

Following the spike in inflation and wages, there is a higher possibility of interest rate increases, which has contributed to the appreciation of the Japanese Yen. 

In the meantime, I mentioned in last week's post that Pound Sterling might correct a bit before dropping any lower.

It strengthened as anticipated, but it was unable to rise over 1.2360-80 and sank instead. There are still indications of weakness in the UK economy. Retail sales, GDP, and CPI all missed estimates, which strengthened market expectations that should the economy not improve, Bank of England would cut interest rates at least twice in 2025.

Although there isn't much to focus on in terms of economic news this week, the incoming US government and whatever announcements they may have to make could be the main motivator. 

As such, I anticipate market volatility. In gold, in particular, I anticipate excessive two-way moves.

#GOLD @ $ 2703- Gold may rise initially, but it might have trouble unless it breaks $ 2718 for $ 2725-30 or $ 2745 zones. If $ 2688-90 gives up, there is a greater chance of a decline, which might test the $2673-78 or lower. 

#EURO @ 1.0271- It is highly unlikely that Euro will rise beyond 1.0385. The 1.0210 down side break will trigger it to go towards 1.0160–70 zones.

#GBP @ 1.2163- There will continue to be pressure on the Pound Sterling. It needs to clear 1.2295 for 1.2340 on the up. However, for 1.1950, the probability of falling will increase on break 1.2010.

#JPY @ 156.30- Probably later in the week, we are in for a turbulent few sessions. For USD to reach 159.60, it must rise over 158.20. A break of 155.10 will move it in towards the low of 153.80 on the downside.

The writer is the former Country Treasurer of Chase Manhattan Bank

Disclaimer: The views and analysis in this article are the opinions of the author and are for informational purposes only. It is not intended to be financial or investment advice and should not be the basis for making financial decisions.