Gold prices rally on US President Trump’s rhetoric, haven demand
- Gold rebounds from lows, benefiting from safe-haven demand amid Trump's trade stance and US stock volatility.
- New Treasury Secretary Bessent proposes 2.5% starting tariffs; Trump seeks higher, escalating trade war fears.
- Markets cautious ahead of FOMC meeting; Fed likely to hold rates, monitoring trade policies and economic signals.
Gold prices bounced off after refreshing four-day lows and rose on Tuesday as United States (US) equities recovered following Monday’s sell-off, while the precious metal benefited from safe-haven flows. Trade comments by US President Donald Trump keep investors nervous, which turned to the yellow metal, as XAU/USD is seen changing hands at $2,763, up by 0.88% at the time of writing.
Scott Bessent, appointed by Trump as US Treasury Secretary, was approved by the Senate. He said that he supports universal tariffs on imports, which would start at 2.5% and could be gradually increased. However, Trump said that he wants much larger tariffs, adding that if companies don’t like duties, they should produce in the United States.
Trump added fuel to the “trade war” saying that he will apply tariffs to chips, pharmaceuticals, steel, aluminum and copper. After those comments, Bullion consolidated near the $2,730 – $2,744 range before rallying past the $2,750 figure as traders eyed the record-high at $2,790.
Safe-haven flows boosted the Greenback, as the US Dollar Index (DXY) hit a daily peak at around 108.05 before reversing to 107.92 and it is now up 0.47%.
Data-wise, US Durable Goods Orders were mixed, as total figures contracted deeper for the second straight month, while core orders improved, according to the US Department of Commerce. The Conference Board (CB) revealed that Consumer Confidence deteriorated in December, as Americans are concerned about the labor market.
Ahead of the week, the US Federal Open Market Committee (FOMC) has begun its two-day meeting, in which the Federal Reserve (Fed) is expected to hold rates as the disinflation process has halted. This, along with Trump’s 2.0 controversial trade policies, suggests that Fed officials could be patient in assessing its impact on monetary policy.
Daily digest market movers: Gold price climbs above $2,750 amid strong US Dollar
- Gold prices rose as US Real yields remain firm. The 10-year Treasury Inflation-Protected Securities (TIPS) yield sits at 2.128%, unchanged on Tuesday.
- The US 10-year Treasury bond yield edges up one bps during the day to 4.538%.
- US Durable Goods Orders fell sharply by -2.2% MoM in December, significantly missing the expected 0.8% increase and worsening from November’s -2% decline.
- The Conference Board reported that US Consumer Confidence dropped to 104.1, falling short of analysts’ expectations of 105.6. All five components of the index showed deterioration.
- Money market futures, based on CME FedWatch Tool data, have priced in 54 basis points of Federal Reserve rate cuts for 2025.
XAU/USD technical outlook: Gold surges towards $2,770 as bulls target ATH
Gold prices are trying to resume their ongoing uptrend after a day in which XAU/USD lost more than 1% amid Trump’s trade rhetorics. He even went further late on Monday, which sparked XAU/USD’s jump above $2,750, opening the door for bulls to open fresh long positions as they eye the record-high at $2,790.
If XAU/USD surpasses $2,790, it could challenge the $2,800 figure. Psychological levels like $2,850 and $2,900 would follow.
On the other hand, if bears moved in and pushed Bullion prices below $2,750, the next support would be the confluence of 50and 100-day Simple Moving Averages (SMAs), each at $2,663 and $2,658. If surpassed, the 200-day SMA at $2,524 would follow.
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
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