Gold prices remain firm as geopolitical concerns counterbalance tariff threats

Gold prices traded sideways on Monday, oscillating around the $2,640 per ounce mark. If gold prices rise, they may encounter resistance at $2,720 per ounce, while if gold prices decline, support may be encountered near $2,600 per ounce. 

Gold prices have been typically directed by the dollar’s movement, as the competing gold typically loses appeal as an investment when the dollar rises. The dollar increased on Monday, and the index rose from 106.1 to 106.3. US treasury yields declined, however, putting pressure on the dollar, with the US 10-year bond yield dropping from 4.21% to 4.19%.  

President-elect Donald Trump stated on social media over the weekend that BRICS nations would face 100% tariffs if they created a new currency to replace the dollar. BRICS is an intergovernmental organization comprising nine countries – Brazil, Russia, India, China, South Africa, Iran, Egypt, Ethiopia, and the United Arab Emirates. Trump’s threats raised concerns that the incoming US President is going to start multiple trade wars, boosting the dollar and putting pressure on gold prices. Trump communicated more tariff measures last week, stating that his administration will impose an additional 25% tariff on imports from Canada and Mexico, with an extra 10% to the 60% already announced during his election campaign on Chinese goods. 

Geopolitical tensions continue to rise, on the other hand, raising demand for safe-haven assets. A 60-day ceasefire between Israel and Lebanon was officially declared last week. However, reports that Israel already broke the ceasefire, boosted gold prices on Monday. Meanwhile, a civil war has broken out in Syria, further destabilizing the region. In addition, Russian President Vladimir Putin stated that Russia may use its new nuclear-capable missiles against Ukraine in response to Ukraine’s using long-range missiles to attack Russian territories.

The US Federal Reserve cut interest rates by 25 basis points in November to a target range of 4.50% to 4.75%. Gold prices are supported by expectations of further Fed rate cuts. Market odds of a December rate cut dropped from 68% to 63% on Monday, putting pressure on gold prices.

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Written by:
Myrsini Giannouli

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