Global gold prices have surged sharply over the past few days, hitting their highest levels in more than ten weeks. This surge came on the heels of a decline in the US dollar following the inauguration of President Donald Trump. The increase in gold prices is expected to be driven by global economic uncertainty and volatility resulting from Trump’s comments on tariffs.
Trump’s comments on gold prices and the US dollar
On Tuesday, gold prices saw a significant jump as investors turned to the precious metal as a safe haven to hedge against economic uncertainty. The sudden decline in the strength of the US dollar following Trump’s inauguration had a direct impact on the market. This decline pushed investors towards gold, which is considered a safe-haven asset in turbulent economic times.
Meanwhile, gold inventories at COMEX-certified warehouses have seen a significant jump over the past six weeks. Inventories have risen by almost a third as market participants rushed to take delivery of the precious metal due to concerns over the possibility of Trump imposing new tariffs. Gold has become more attractive amid these political developments, as many investors have hedged against the possibility of a decline in the market value of the US dollar.
President Trump and Tariff Fears
After weeks of global speculation about what tariffs Trump might impose, new news has emerged that the US president may have to postpone the imposition of these tariffs. This postponement has helped ease some concerns in global stock markets, but its impact has been pressure on the US dollar. For his part, Yiap Jun Rong, market strategist at IG, said: “There is a sense of relief in the markets after the announcement that tariffs will not be a priority for Trump initially.
The effects of Trump’s policy on US interest rates
Experts expect gold to remain positive in the coming period. However, immediate resistance remains to be monitored at the $2,720 per ounce level. This level may be difficult to break, but it will remain an important indicator in determining the price path in the near term. If gold surpasses this level, it may climb further toward new record highs. Investors view gold as a hedge against economic and financial fluctuations, especially as concerns grow over the negative effects of new economic policies.
Trump’s Policy Effects on US Interest Rates
President Trump’s economic policies drive concerns about inflation, sparking questions about their impact on US interest rates. The Federal Reserve plans to raise interest rates in response to these policies. Continued rate hikes could pressure gold prices, as the metal does not provide returns like stocks or bonds. Despite this, many investors choose gold to mitigate risks. Settlement prices for gold have fluctuated in recent days, reflecting these dynamics.
At the close of trading on Monday, gold prices declined despite the decline in the US dollar, as investors assessed the economic policies of the US president after his inauguration. The prices of the yellow metal futures fell by 0.6%, to reach $ 2,731.80 per ounce. Prices had reached $ 2,715.60 at one point during the same session, indicating the great volatility in the market.
Meanwhile, spot gold rose by 0.7% to reach $ 2,727.19 per ounce, recording its highest level since November 6. The precious metal was close to the all-time high reached last October, which reached $ 2,790.15 per ounce.
The impact of the rise in the US dollar on gold
Despite the decline in the US dollar, US gold futures fell by 0.2% to $2,744.40 per ounce. This decline came after President Trump refrained from imposing tariffs immediately, which was expected at the beginning of the week. In parallel, the US dollar index rose by 0.4% to 108.30 points, which contributed to the pressure on gold.
Impact of other metal prices
On the other hand, other metal prices witnessed significant changes. Spot silver added 0.5% to $30.65 per ounce, while palladium fell by 1.7% to $928.75 per ounce. Platinum also fell by 0.2% to $940.70 per ounce. Despite volatility of these metals, gold remained at the forefront of investment options in global markets.
The Future of Gold Prices on the Horizon
Investors around the world actively monitor gold, valuing it as a critical safe haven during economic and geopolitical instability. Economic and political factors heavily influence the future of XAU prices, making it challenging to predict their path in the near term. However, current analysis indicates that there are several major influences that will determine market trends in the coming period.
Economic influences and monetary policies
One of the main factors that will affect gold prices is the monetary policy followed by the US Federal Reserve (the Fed). If the Fed decides to raise interest rates to combat inflation or support the US dollar, this may put pressure on gold prices. This is because higher interest rates increase the opportunity cost of holding XAU, which does not generate fixed returns like bonds or stocks.
However, if inflation fears continue to grow, or if there are expectations of a slowdown in the US economy, investors may turn to gold as a hedge against rising prices.
Supply and Demand Factors
On the other hand, the forces of supply and demand are important factors that affect the determination of gold prices. Supply includes the production of XAU from mines and its extraction, while demand includes the purchase of gold by governments, central banks, and investors. Although gold has limited supplies compared to many other commodities, demand for the yellow metal can fluctuate based on economic conditions.
Many central banks around the world are seeking to diversify their gold reserves as part of their strategies to reduce reliance on paper currencies such as the US dollar. This means that demand for XAU by these banks may increase in the future, supporting prices.
