Gold price; $2,945. Record high on tariff fears & Fed minutes:
- Gold price surged for the third consecutive day, reaching a new record high on Wednesday.
- US President Donald Trump criticized Ukraine and reiterated his commitment to implementing several tariffs.
- From a technical perspective, Tuesday’s daily close above $2,910 proved significant, propelling Gold to a fresh all-time peak.
Gold’s price (XAU/USD) extended its upward momentum this week, hitting a new all-time high above $2,945 during Wednesday’s European trading session. This rally followed strong remarks from United States (US) President Donald Trump regarding Ukraine overnight. These comments came shortly after initial discussions between US and Russian officials, sparking concerns among traders about the likelihood of a peaceful resolution. Concurrently, President Trump reaffirmed the impending implementation of 25% tariffs on automobile imports, with plans to extend these tariffs to pharmaceutical and semiconductor imports as well.
Looking ahead, the Federal Reserve (Fed) is scheduled to publish the Federal Open Market Committee (FOMC) Minutes from its January meeting. This event has the potential to disrupt Gold’s upward trajectory, as recent statements from several Fed officials suggested that current interest rates are appropriate, while acknowledging emerging inflationary pressures that warrant continued monitoring.
Daily Market Insights: Expanding Tariffs in Focus
- The Fed is set to release its January FOMC Minutes at 19:00 GMT.
- On late Tuesday, Bloomberg reported that US President Donald Trump pledged to impose tariffs of around 25% on imports of automobiles, semiconductors, and pharmaceuticals.
- Turkish Gold mining company, Koza Altin, announced its aim to exceed 40 tons of Gold production within the next five years, as per an exchange filing released post-market on Tuesday, according to Bloomberg reports.
- The US 10-year Treasury yield is trading near this week’s peak at approximately 4.56% at the time of this report.
Technical Outlook: Fed Minutes Pose a Potential Headwind
Gold is navigating a precarious situation on Wednesday after achieving a new all-time high above $2,945. The upcoming release of the Fed Minutes for the January meeting later today introduces a risk event that could trigger a downward correction in Gold prices. From a technical analysis standpoint, this peak could be interpreted as a rejection at the all-time high, potentially encouraging sellers to push prices lower.
Daily Pivot Points have been recalculated. The initial support level is identified at $2,921, which is the daily Pivot Point itself. This level has already provided support during the Asian trading session. Should this level be breached again, the S1 support at $2,906 is expected to act as the next line of defense.
Conversely, the first resistance barrier on the upside is the R1 resistance at $2,951. Beyond this, the R2 resistance level at $2,966 becomes the next target before a potential move towards the $3,000 milestone.
XAU/USD: Daily Chart
Gold FAQs
Central banks are the largest holders of Gold reserves globally. To bolster their currencies during times of economic instability, central banks often diversify their reserves by purchasing Gold to enhance the perceived strength of their economy and currency. Substantial Gold reserves can inspire confidence in a nation’s financial stability. World Gold Council data indicates that central banks added 1,136 tonnes of Gold, valued at approximately $70 billion, to their reserves in 2022. This represents the highest annual purchasing volume since records began, with emerging economies such as China, India, and Turkey rapidly increasing their Gold holdings.
Gold typically exhibits an inverse relationship with the US Dollar and US Treasuries, both of which are major reserve and safe-haven assets. When the Dollar weakens, Gold prices tend to increase, enabling investors and central banks to diversify their assets during turbulent times. Gold also shows an inverse correlation with riskier assets. Stock market rallies usually put downward pressure on Gold prices, while sell-offs in risk-associated markets tend to benefit the precious metal.
Various factors can influence Gold price fluctuations. Geopolitical instability or fears of a significant economic downturn can rapidly drive up Gold prices due to its safe-haven status. As a non-yielding asset, Gold tends to appreciate in environments with lower interest rates, while higher borrowing costs generally exert downward pressure on its price. However, most price movements are significantly influenced by the behavior of the US Dollar (USD), as Gold is priced in dollars (XAU/USD). A strong Dollar often limits Gold price appreciation, whereas a weaker Dollar is more likely to push Gold prices higher.
