Gold retreats from an all-time high on profit-taking

Gold’s rally was halted on Thursday and gold prices retreated from Wednesday’s all-time high of $2,882 per ounce, dropping to $2,860 per ounce. If gold prices rise, they may encounter resistance at $2,900 per ounce, while if gold prices decline, support may be encountered near $2,700 per ounce. 

Gold prices were on a bullish trend early in the week, reaching a new all-time high of $2,880 per ounce on Wednesday. Gold’s rally was halted on Thursday, however, and gold prices retreated as risk aversion sentiment started to fade and many traders rushed to realize their gains.

Uncertainty over US President Donald Trump’s future policies and trade tariffs promotes a risk aversion sentiment, raising the appeal of safe-haven assets, such as gold. Concerns that Trump’s trade policies may ignite global trading wars are raising the appeal of gold. 

Trump has been using threats of imposing trade tariffs as a negotiation tool to further his agenda with other countries. Trump has threatened BRICS countries with massive tariffs of up to 100% if they try to replace the dollar with any other currency or if they create a new currency for international trade. On Saturday, Trump announced that he would impose 25% tariffs on Canadian and Mexican goods, except Canadian energy exports, which will be subject to a 10% tariff. 

In addition, Trump threatened to impose a 10% duty on imports from China to the US. On Tuesday, Trump stated that he is determined to impose a 10% duty on imports from China to the US. China, however, is retaliating in kind, imposing tariffs on US imports to China. The Chinese finance ministry said that it would impose levies of 15% on coal and Natural Gas and 10% on crude oil and other commodities.

On Monday, Trump posted a new list of threats and grievances on his social media concerning Canada, China, and several other countries. Trump’s comments triggered a risk aversion sentiment boosting gold prices to all-time highs early on Monday. Later on Monday, however, Trump took back some of his tariff threats, demonstrating that they are used to intimidate other countries into submission. Trump stated that he would postpone imposing tariffs on Canada and Mexico for a month, still holding the tariffs as a threat against them. Gold prices retreated somewhat after Trump withdrew the tariffs.

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 index rose from 107.7 to 108.0 in early trading on Thursday then dropped back to 107.7. US treasury yields increased, with the US 10-year bond yield rising from 4.42% to 4.44%.  

Gold prices are under pressure by decreased Fed rate cut expectations. The US Federal Reserve held interest rates steady at its January meeting, which was concluded on Wednesday, after delivering three consecutive rate cuts in 2024. FOMC policymakers voted unanimously to maintain the federal funds range to a target range of 4.25% to 4.50%, which was in line with expectations. 

Fed Chair Jerome Powell delivered a mildly hawkish message after the policy meeting, putting pressure on gold prices. Powell stated that the Fed’s approach will remain data-driven and stressed that the central bank needs to consider potential policy changes under Trump’s administration. Market odds of another rate cut before summer dropped after Powell’s speech, with markets pricing in a rate cut in June at the earliest.

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: