Gold prices rise as tariff threats boost safe-haven demand

Gold prices rose from $2,740 to $2,765 per ounce on Tuesday on increased demand for safe-haven assets. If gold prices rise, they may encounter resistance at $2,790 per ounce, while if gold prices decline, support may be encountered near $2,690 per ounce. 

Gold prices gained strength last week, nearing their all-time high of $2,790 per ounce, boosted by a weaker dollar and uncertainty over Donald Trump’s proposed tariffs. Uncertainty over Trump’s future policies and trade tariffs promotes a risk aversion sentiment, raising the appeal of safe-haven assets, such as gold. Gold prices had been trading in overbought territory, however, and suffered a correction on Monday, retreating from near-record highs. Gold prices rallied on Tuesday as Trump’s administration renewed tariff threats.

Gold prices are gaining strength on market concerns over Trump’s future policies and trade tariffs. Trump has already announced a plan to impose 25% tariffs on imports from Canada and Mexico starting February 1 and he has hinted that his administration is considering universal tariffs on all imports to the US. 

Trump has been using threats of imposing trade tariffs as a negotiation tool to further his agenda with other countries. On Tuesday, newly appointed US Treasury Secretary Scott Bessent proposed tariffs on all US imports, which would start at 2.5% and could be gradually increased. Trump, however, stated that he wants more aggressive tariffs, saying that he will apply tariffs to chips, pharmaceuticals, steel, and copper. Trump’s comments triggered a risk aversion sentiment and demand for safe-haven assets rose, boosting gold prices. 

Gold prices have been typically directed by the dollar’s movement, as the competing gold loses appeal as an investment when the dollar rises. The dollar rallied on Tuesday, and the index rose from 107.3 to 107.9. US treasury yields remained steady ahead of Wednesday’s Fed rate decision, with the US 10-year bond yielding approximately 4.54%. Gold prices rose on Tuesday, however, as increased safe-haven demand outweighed the dollar’s rally.       

Gold prices are under pressure by decreased Fed rate cut expectations. The US Federal Reserve cut interest rates by 25 basis points at its latest meeting to a target range of 4.25% to 4.50%. Markets this week will focus on the Fed’s rate decision on the 29th. The central bank is widely expected to keep interest steady this week and market odds of a rate cut are practically nil. Odds of another rate cut before summer are low and traders will focus on the Fed’s forward guidance to predict the timeline for future rate cuts.

TRADE GOLD

The content provided in this material and/or any other material that this content is referred to, whether it comes from a third party or not, is for information purposes only and shall not be considered as a recommendation and/or investment advice and/or investment research and/or suggestions for performing any actions with financial products or instruments, or to participate in any particular trading strategy and cannot guarantee any profits. Past performance does not constitute a reliable indicator of future results. TopFX does not represent that the material provided here is accurate, current, or complete and therefore shouldn't be relied upon as such. This material does not take into account the reader's financial situation or investment objectives. We advise any readers of this content to seek their own advice. Without the approval of TopFX, no reproduction or redistribution of the information provided herein is permitted.

Written by:
Myrsini Giannouli

Share the article: