- Gold prices are on track to increase by nearly 1% on Tuesday.
- Traders are gearing up for Trump's first day in office as headline risks rise.
- Gold hit a new two-month high at $2,732.70, with $2,790 entering this area as strong resistance.
Gold prices (XAU/USD) rose after US President Donald Trump confirmed his intention to impose 25% tariffs on Canada and Mexico as early as February, as well as tariffs on silver and gold. The rally is driven by safe-haven inflows and a breakout of a crucial technical resistance level. . According to a report by Bloomberg, China has been exempted from the immediate fines.
President Trump's potential tariffs on silver and gold have created uncertainty in the market, driving up futures premiums. President Trump's domestic policies are the second major factor, which could further extend the bullish momentum for gold and increase demand for haven assets. Meanwhile, bond yields plunged to 4.527% in Asian markets on Tuesday, although markets were closed on Monday for Martin Luther King Day.
A daily digest that moves the markets: keep an eye on the headlines
- President Donald Trump's comments during his first executive order signing session surprised traders. President Trump said during the meeting that tariffs on Canada and Mexico could go into effect as early as February. The market reaction came as the Canadian dollar (CAD) and Mexican peso (MXN) suddenly fell due to the unexpected decision, with the Wall Street Journal already reporting on Monday that the tariffs would be delayed until a task force is formed. That's because they published an article saying that it would happen. Bloomberg first reported.
- President Trump confirmed that universal tariffs on all imports into the United States are also being considered and will be introduced at a later stage, Reuters reports.
- Saudi Arabia's mining investment fund plans to buy an interest in Pakistan's Reko Diq project, which will be one of the world's largest copper mines when completed, as it accelerates expansion into the country's precious metals sector, the Financial Times says. reported.
- US yields are catching up with Monday's developments, although the day remained closed for Martin Luther King Jr.'s Day. The US 10-year bond index fell to 4.527%, but rebounded at the start of European trading. The 10-year note is still trading 5% down from last week's high of 4.788%.
Technical analysis: gold sweet spot
Gold prices rose for the second day in a row on Tuesday, benefiting from US President Donald Trump's selective measures to limit Mexico and Canada and defer taxes on China. Tariffs are usually seen as a negative factor for precious metals, but in this case, potential tariffs on gold and silver are pushing up prices. It seems like Gold's story hasn't gotten tired of him yet.
Profit-taking could emerge and push gold prices back to $2,700. The next support is at $2,668, the downtrend line of the pennant chart pattern that broke last week. In case of further downside, the next levels to watch are the 55-day simple moving average (SMA) and 100-day SMA converging around $2,646.
At the time of writing, $2,721 is being tested, which is like a double top for November and December. If bullion breaks through that level, the all-time high of $2,790 will be a key upside barrier.
XAU/USD: daily chart
Gold FAQ
Gold has played an important role in human history as it has been widely used as a store of value and a medium of exchange. Today, apart from their brilliance and use as jewellery, precious metals are widely seen as safe assets, meaning they are considered a good investment in turbulent times. Gold is also widely seen as a hedge against inflation and currency depreciation, as it is not dependent on any particular issuer or government.
Central banks are the largest holders of gold. With the aim of supporting their currencies in times of turmoil, central banks tend to purchase gold to diversify foreign exchange reserves and improve perceptions of economic and currency strength. High gold reserves can be a source of confidence in a country's solvency. Central banks added 1,136 tonnes of gold worth about $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest annual purchase amount since records began. Central banks in emerging countries such as China, India and Türkiye are rapidly increasing their gold reserves.
Gold has an inverse relationship with the US dollar and US Treasuries, which are major reserve and safe haven assets. Gold tends to rise when the dollar falls, allowing investors and central banks to diversify their assets during times of turmoil. Gold is also inversely correlated with risk assets. Rising stock markets tend to push gold prices down, while declines in riskier markets tend to favor the precious metal.
Prices may vary depending on various factors. Geopolitical instability and fears of a deep recession can cause the price of gold to quickly rise from its safe-haven status. Gold, a non-yielding asset, tends to rise when interest rates fall, but rising costs usually put pressure on the yellow metal. Still, most moves will depend on how the US dollar (USD) behaves, as the asset is priced in dollars (XAU/USD). A strong dollar tends to suppress gold prices, while a weak dollar can push gold prices up.
