- Gold price gains strong positive traction amid flight to safety following Trump’s tariff comments.
- Expectations of further Fed rate cuts drag down US bond yields and further support the yellow metal.
- A modest recovery in the USD, coupled with a positive risk tone, could cap the commodity’s gains.
The price of Gold (XAU/USD) attracts some continuation buying for the second day in a row and rises to its highest level since November 6, around the $2,726 region during the Asian session on Tuesday. US President Donald Trump has suggested imposing tariffs on Canada and Mexico in the near future, reigniting fears of a trade war and increasing demand for the traditional safe haven precious metal. Adding to this, falling US Treasury yields, driven by expectations that the Federal Reserve (Fed) will cut interest rates twice this year amid signs of easing inflation in the US, it further drives flows into the non-yielding yellow metal.
Meanwhile, expectations that Trump’s protectionist policies would reignite inflationary pressures and force the Fed to maintain its hawkish stance are helping the US dollar (USD) recover well from a two-week low hit on Monday. This, along with a generally positive tone around equity markets, limits the upside for the price of Gold. However, the fundamental backdrop suggests that the path of least resistance for XAU/USD is to the upside. There is no relevant US economic data scheduled for release on Tuesday, leaving the commodity at the mercy of overall risk sentiment and USD price dynamics.
Gold price gets support from trade war fears, bets on two Fed rate cuts in 2025
- US President Donald Trump said Tuesday that he intends to impose 25% tariffs on Canada and Mexico, and the target date for the tariffs would be as soon as early February. Trump also threatened that we could impose tariffs on China if it does not approve a TikTok deal, underpinning demand for the safe haven gold price.
- The US Producer Price Index (PPI) and Consumer Price Index (CPI) released last week signaled signs of declining inflation. This suggests the Fed may not rule out the possibility of rate cuts by the end of this year and drags the 10-year US government bond yield to a near three-week low.
- The US dollar (USD) regains positive traction after falling overnight to a two-week low amid expectations that Trump’s protectionist policies could increase inflation and force the Federal Reserve to maintain its hawkish stance. This, in turn, could limit any further gains for the non-yielding yellow metal.
- The ceasefire agreement between Israel and Hamas, along with hopes that Trump could relax restrictions on Russia in exchange for a deal to end the war in Ukraine, remains favorable for the risk-positive tone. This could further restrain bulls from opening new positions around XAU/USD in the absence of relevant US economic data.
- The market’s focus will remain on the Bank of Japan’s crucial January 23-24 monetary policy meeting on Friday. In addition to this, the release of preliminary PMI data, which will be watched for fresh insights into global economic health, should infuse volatility around the commodity during the second half of the week.
Gold price seems ready to appreciate further towards the $2,746-$2,748 resistance zone
From a technical perspective, the price of Gold appears to have found acceptance above the $2,720 supply zone. Furthermore, the oscillators on the daily chart have been gaining positive traction and are still far from being in overbought territory. This, in turn, favors bullish traders and suggests that the path of least resistance for XAU/USD is to the upside. Therefore, continuation strength towards the next relevant hurdle near the $2,735 horizontal zone, en route to the $2,746-$2,748 region, seems a distinct possibility. The momentum could extend further towards challenging the all-time peak, around the $2,790 zone touched in October 2024.
On the other hand, any corrective pullback now seems to find decent support near the $2,700 level. A subsequent drop below the intraday low, around the $2,689 region, could trigger some technical selling and drag the price of Gold further towards the $2,662-$2,660 region. The latter should act as a pivotal point, below which from the November low and the 100 day EMA.
Gold FAQs
Gold has played a fundamental role in human history, as it has been widely used as a store of value and medium of exchange. Today, aside from its brilliance and use for jewelry, the precious metal is considered a safe-haven asset, meaning it is considered a good investment in turbulent times. Gold is also considered a hedge against inflation and currency depreciation, since it does not depend on any specific issuer or government.
Central banks are the largest holders of Gold. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and purchase Gold to improve the perception of strength of the economy and currency. High Gold reserves can be a source of confidence for the solvency of a country. Central banks added 1,136 tons of gold worth about $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the largest annual purchase since records exist. Central banks in emerging economies such as China, India and Türkiye are rapidly increasing their gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are the main reserve and safe haven assets. When the Dollar depreciates, the price of Gold tends to rise, allowing 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 the price of Gold, while sell-offs in riskier markets tend to favor the precious metal.
The price of Gold can move due to a wide range of factors. Geopolitical instability or fear of a deep recession can cause the price of Gold to rise rapidly due to its status as a safe haven asset. As a non-yielding asset, the price of Gold tends to rise when interest rates fall, while rising money prices tend to weigh down the yellow metal. Still, most of the moves depend on how the US Dollar (USD) performs, as the asset is traded in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold in check, while a weaker Dollar is likely to push up Gold prices.
Source: Fx Street

I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.