Gold prices retreat from record highs

Gold prices could not maintain their bullish momentum on Monday and suffered a correction, dropping from $2,785 to $2,740 per ounce. 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 have been typically directed by the dollar’s movement, as the competing gold loses appeal as an investment when the dollar rises. The dollar continued declining on Monday, and the index dropped from 107.5 to 107.3. US treasury yields also edged lower, with the US 10-year bond yield falling from 4.63% to 4.54%.       

Donald Trump’s Presidential inauguration at the US capitol attracted market attention on Monday. Trump was sworn in as the 47th president of the United States. 

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. Rumors of a potential 10% duty on imports from China to the US ignited concerns that other nations may face trade tariffs as well. Trump later went back on his comments on imposing trade tariffs on China, after having a phone conversation with Chinese President Xi Jinping.

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.

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Written by:
Myrsini Giannouli

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