Gold at fresh all-time highs ahead of US PCE
- Gold broke through $2,790 and printed a fresh all-time at $2,800.93 on Friday.
- US President Donald Trump confirmed that 25% tariffs will be imposed on Canada and Mexico starting Saturday.
- Gold's price could print more new all-time highs if US PCE data comes out weaker than expected later during the day.
Gold’s price (XAU/USD) is trading around a fresh all-time high, for now on record at $2,800.93, with still a long Friday ahead. On the geopolitical front, markets got rattled by comments from US President Donald Trump who confirmed 25% tariffs to be imposed on Canada and Mexico, the two largest US trading partners, starting on Saturday, and threatened to impose 100% tariffs on BRICS nations if they try to replace the US Dollar with a new currency in international trade. This should act as a headwind for Bullion since it could lead to a trade war and inflation fears with price surges for consumers and manufacturers in the US.
On the economic data front, inflation will be drawing all the attention, with the US Personal Consumption Expenditures (PCE) Price Index releases for December, the Federal Reserve’s preferred inflation gauge, due later on the day. Overall, figures are expected to remain stable or marginally higher.
Daily digest market movers: Ready for a fresh all-time high
- US President Donald Trump is poised to unleash his first wave of tariffs on Saturday, sending foreign governments and businesses rushing to skirt potential duties and prepare for retaliation. Trump has pledged 25% tariffs on about $900 billion in goods from both Canada and Mexico, Bloomberg reports.
- On Thursday, bullion already printed a fresh all-time high after the preliminary 2024 fourth-quarter reading of the US Gross Domestic Product (GDP) came in softer than expected, pointing to lesser growth in the US, Reuters reports.
- President Trump reiterated on Thursday his threat of imposing 100% tariffs on BRICS nations if they try to replace the US Dollar (USD) with a new currency in international trade. Trump posted on TruthSocial: “We are going to require a commitment from these seemingly hostile countries that they will neither create a new BRICS currency, nor back any other currency to replace the mighty US Dollar or, they will face 100% tariff,” and continued “there is no chance that BRICS will replace the US Dollar in international trade, or anywhere else, and any country that tries should say hello to tariffs, and goodbye to America!”
- At 13:30 GMT, the US Personal Consumption Expenditures (PCE) Price Index data for December will be released. Expectations are for the monthly core PCE reading to increase by 0.2% from 0.1% in November. The monthly headline PCE data should tick up 0.3% from 0.1% the previous month.
- Markets might face substantial volatility on Monday due to the possible sanctions being imposed over the weekend by the Trump administration on Canada and Mexico.
Technical Analysis: Litmus test at all-time highs
After a spike higher on early Friday, hitting a fresh all-time high of $2,800.93, the question will be whether bullion will not face some substantial profit-taking. Tariffs are always considered inflationary, thus a headwind for the precious metal. Should the US data come in higher than expected later in the day, inflation concerns would spark more selling pressure, and Gold might quickly dive lower in search of support.
The first support is quite far off, at $2,721, a triple top in November, December and January, broken on January 21. Just below that, $2,709 (October 23, 2024, low) is in focus as a second nearby support. In case both abovementioned levels snap, look for a dive back to $2,680 with a full-swing sell-off.
Analysts and strategists have called for $3,000, but $2,800 looks like a good starting point for the next upside resistance. Based on the price action from Thursday, technical analysis (pivots) shows $2,809 and $2,824 as important daily resistance levels.
XAU/USD: Daily Chart
Tariffs FAQs
Tariffs are customs duties levied on certain merchandise imports or a category of products. Tariffs are designed to help local producers and manufacturers be more competitive in the market by providing a price advantage over similar goods that can be imported. Tariffs are widely used as tools of protectionism, along with trade barriers and import quotas.
Although tariffs and taxes both generate government revenue to fund public goods and services, they have several distinctions. Tariffs are prepaid at the port of entry, while taxes are paid at the time of purchase. Taxes are imposed on individual taxpayers and businesses, while tariffs are paid by importers.
There are two schools of thought among economists regarding the usage of tariffs. While some argue that tariffs are necessary to protect domestic industries and address trade imbalances, others see them as a harmful tool that could potentially drive prices higher over the long term and lead to a damaging trade war by encouraging tit-for-tat tariffs.
During the run-up to the presidential election in November 2024, Donald Trump made it clear that he intends to use tariffs to support the US economy and American producers. In 2024, Mexico, China and Canada accounted for 42% of total US imports. In this period, Mexico stood out as the top exporter with $466.6 billion, according to the US Census Bureau. Hence, Trump wants to focus on these three nations when imposing tariffs. He also plans to use the revenue generated through tariffs to lower personal income taxes.
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