Gold hits multi-month high on tariff woes, lower yields
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The Gold price (XAU/USD) surged on Tuesday, reaching levels not seen since November 2024, trading near the $2,729-$2,730 region during early European hours. Safe-haven demand for the yellow metal grew following U.S. President Donald Trump’s tariff remarks, while declining U.S. Treasury bond yields further bolstered bullish sentiment.
Market drivers
Trump’s tariff threats
President Trump’s announcement of a potential 25% tariff on Canada and Mexico, alongside threats of new tariffs on China over the TikTok deal, spurred a flight to safety. The protectionist policies raised fears of inflationary pressures and reignited concerns about a global trade war.
Fed policy expectations
Bets on two additional Federal Reserve rate cuts in 2025 have contributed to the decline in U.S. bond yields, with the 10-year Treasury yield hitting a near three-week low. Despite these expectations, market sentiment leans toward the Fed pausing its rate-cutting cycle later this month due to potential inflation stemming from Trump’s policies.
U.S. dollar movement
The USD recovered after an overnight slump to a two-week low, driven by optimism that Trump’s policies could support inflation and keep the Federal Reserve hawkish. This partial recovery has capped further gains for Gold
Geopolitical developments
The Israel-Hamas ceasefire and potential easing of U.S. sanctions on Russia—contingent on resolving the Ukraine war—bolstered a positive risk tone in equity markets, limiting safe-haven flows to Gold.
Technical outlook
Upside potential
Gold has found acceptance above the $2,720 supply zone, with daily chart oscillators gaining positive traction while avoiding overbought territory. This setup supports further upside potential, targeting:
The $2,735 resistance level
The $2,746-$2,748 region
The all-time high of $2,790 reached in October 2024
Downside risks
Key support levels include
The $2,700 mark, which could attract dip-buying interest
The $2,689 overnight swing low
The $2,662-$2,660 pivotal region
A break below $2,660 could expose Gold to further losses, targeting $2,635 and the $2,622-$2,618 confluence, defined by a short-term ascending trend-line and the 100-day EMA.
Upcoming catalysts
The market focus will shift to the Bank of Japan’s policy meeting on January 23-24 and the release of global flash PMI data later this week. These events are expected to provide further insight into economic conditions and introduce fresh volatility for Gold traders.
Conclusion
Gold’s bullish setup remains intact, supported by geopolitical uncertainty, declining bond yields, and the Fed’s dovish outlook. While near-term resistance levels may slow momentum, the fundamental backdrop favors additional gains, potentially challenging previous record highs. However, a stronger USD and improving risk sentiment could limit the upside in the short term.
Market drivers
Trump’s tariff threats
President Trump’s announcement of a potential 25% tariff on Canada and Mexico, alongside threats of new tariffs on China over the TikTok deal, spurred a flight to safety. The protectionist policies raised fears of inflationary pressures and reignited concerns about a global trade war.
Fed policy expectations
Bets on two additional Federal Reserve rate cuts in 2025 have contributed to the decline in U.S. bond yields, with the 10-year Treasury yield hitting a near three-week low. Despite these expectations, market sentiment leans toward the Fed pausing its rate-cutting cycle later this month due to potential inflation stemming from Trump’s policies.
U.S. dollar movement
The USD recovered after an overnight slump to a two-week low, driven by optimism that Trump’s policies could support inflation and keep the Federal Reserve hawkish. This partial recovery has capped further gains for Gold
Geopolitical developments
The Israel-Hamas ceasefire and potential easing of U.S. sanctions on Russia—contingent on resolving the Ukraine war—bolstered a positive risk tone in equity markets, limiting safe-haven flows to Gold.
Technical outlook
Upside potential
Gold has found acceptance above the $2,720 supply zone, with daily chart oscillators gaining positive traction while avoiding overbought territory. This setup supports further upside potential, targeting:
The $2,735 resistance level
The $2,746-$2,748 region
The all-time high of $2,790 reached in October 2024
Downside risks
Key support levels include
The $2,700 mark, which could attract dip-buying interest
The $2,689 overnight swing low
The $2,662-$2,660 pivotal region
A break below $2,660 could expose Gold to further losses, targeting $2,635 and the $2,622-$2,618 confluence, defined by a short-term ascending trend-line and the 100-day EMA.
Upcoming catalysts
The market focus will shift to the Bank of Japan’s policy meeting on January 23-24 and the release of global flash PMI data later this week. These events are expected to provide further insight into economic conditions and introduce fresh volatility for Gold traders.
Conclusion
Gold’s bullish setup remains intact, supported by geopolitical uncertainty, declining bond yields, and the Fed’s dovish outlook. While near-term resistance levels may slow momentum, the fundamental backdrop favors additional gains, potentially challenging previous record highs. However, a stronger USD and improving risk sentiment could limit the upside in the short term.