Gold’s sell-off halted on Trump tariff concerns

Gold prices steadied on Tuesday, trading around the $2,620 per ounce on Monday level. If gold prices rise, they may encounter resistance at $2,725 per ounce, while if gold prices decline, support may be encountered near $2,560 per ounce. 

Gold prices skyrocketed to an all-time high of $2,700 per ounce earlier this month, but had been moving in overbought territory, and collapsed after the announcement of Donald Trump’s victory in the US Presidential elections. 

The announcement that President-elect Donald Trump has chosen hedge fund manager Scott Bessent as the new US Secretary of the Treasury put pressure on gold prices on Monday. Bessent is known for his cautious stance, and he is considered a safe choice to take over from Janet Yellen as the next US Treasury Secretary, which is lowering the demand for safe-haven assets.

Concerns over Trump’s proposed tariffs, however, raised safe-haven demand on Tuesday, boosting gold prices. President-elect Donald Trump communicated more tariff measures on his social media. Trump stated that his administration would impose an additional 25% tariff on imports from Canada and Mexico, with an additional 10% to the 60% already announced during his election campaign on Chinese goods. 

Geopolitical tensions cooled this week, leading to a drop in safe-haven demand. Reports that Israeli Prime Minister Benjamin Netanyahu has finally accepted a ceasefire deal with Lebanon put pressure on gold prices on Tuesday. The deal will hopefully put an end to the 14-month conflict and has the potential to restore stability in the Middle East.

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 Tuesday, and the index rose from 106.8 to 107.0. US treasury yields also strengthened, with the US 10-year bond yield rising from 4.28% to 4.30%.

The US Federal Reserve cut interest rates by 25 basis points last week to a target range of 4.50% to 4.75%. The Fed had already launched its easing cycle in September, with an aggressive 50-bp rate cut, signaling the end of its restrictive monetary policy. Gold prices are supported by expectations of further Fed rate cuts. Rate cut expectations have been fluctuating in the past couple of weeks, with the odds of a December rate cut at approximately 60%.

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Written by:
Myrsini Giannouli

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