Gold price subsided further from record highs on Monday with the US dollar strengthened by US trade tariffs. Spot market gold traded at $2,794 at the time of writing, down by 0.1%. Also, concerns over US inflation rate have reduced the prospect of the Fed lowering interest rates in the first quarter of the year.
US President over the weekend imposed 25% tariffs against imports from Canada and Mexico and 10% on China. The move has seen the affected countries threaten retaliatory measures, which could escalate the standoff.
Canada has announced 25% counter-tariffs on $155 billion worth of imports from the United States. The first pahse will target $30 billion worth of imports to commence on Tuesday, with the balance set to be implemented later.
The tariff standoff seems to have favoured the greenbuck initially, but gold prices will likely strengthen in the coming days once the economic cost of the tariffs become clearer. Gold’s safe haven status makes it an attractive asset in times of high-risk economic developments such as now.
However, US Personal Consumption Expenditure (PCE) data released on Friday. According to the data,inflation rose at the rate of 2.6% in December, up from November’s 2.4%, in line with midian forecast figures. This adds credence to the Fed’s decision to keep interest rates unchanged in its meeting last week. That adds support to the US dollar.
Gold price pivots at $2,790 and the momentum favours the buyers to be in control. The first barrier is likely to be at $2,805. Breaking above that level will strengthen the momentum and could potentially test the next hurdle at $2,810.
On the other hand, breaking below $2,790 will signal a shift in the momentum to the downside. In that case, immediate support is likely to be at $2,785. However, a stronger momentum will break below that level and invalidate the upside thesis. Also, it could extend the decline to test the second support at $2,780.
This post was last modified on Feb 03, 2025, 09:49 GMT 09:49