Gold rises to new all-time highs then retreats

Gold prices touched a new all-time high of $2,947 per ounce on Wednesday but lost their bullish momentum later, slipping back to $2,938 per ounce. If gold prices rise, they may encounter resistance at the psychological level of $2,950 per ounce, while if gold prices decline, support may be encountered near $2,850 per ounce. 

Gold prices reached a new all-time high of $2,947 per ounce on Wednesday and are likely to cross the $2,950 per ounce boundary in the following days. 

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. 

US President Donald Trump has been using threats of imposing trade tariffs as a negotiation tool to further his agenda with other countries. Trump has threatened that he will announce reciprocal tariffs on many countries, which would raise US import taxes to match those imposed by the country’s other trading partners. On Tuesday, Trump threatened to impose 25% tariffs on foreign cars and semiconductor chips. If Trump goes through with these heavy tariffs, global inflation is likely to rise and the economic outlook will worsen, thus promoting a risk aversion sentiment that boosts safe-haven assets.

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 gained strength on Wednesday and the dollar index rose from the 107.0 to the 107.2 level. US treasury yields remained firm, with the US 10-year bond yielding approximately 4.54%.

US President Donald Trump and Russian President Vladimir Putin met in Riyadh, Saudi Arabia on Tuesday but the meeting was fruitless, boosting safe-haven assets. Hopes that the crisis between Russia and Ukraine might finally end, however, dropped as Ukrainian President Volodymyr Zelenskiy refused to attend the meeting. Zelenskiy stated that fair negotiations to end the war should involve Ukraine and the EU. The Russian side has also toughened its stance, stating that further meetings between Trump and Putin are not currently necessary due to unresolved Russian demands regarding Ukraine’s pending membership in NATO. At the same time, Ukrainian drone attacks have damaged a key Russian oil pipeline in Kazakhstan, disrupting oil supply and boosting oil prices. 

Gold prices are under pressure by decreased Fed rate cut expectations. The US Federal Reserve held interest rates steady at its January meeting 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%. Markets odds of rate cuts within the year are currently between 25 and 50 basis points as inflationary pressures remain high.

The minutes of the January FOMC meeting were released on Wednesday and were overall hawkish, lowering Fed rate cut expectations. Policymakers were concerned with the impact that trade tariffs might have on US inflation and some Fed members stated that some measures of inflation had increased recently.

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Written by:
Myrsini Giannouli

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