Yesterday saw a decline in prices as markets processed various factors, including tariff threats and a market upheaval triggered by the Chinese AI startup DeepSeek. Following a low of $2730/oz, the precious metal has slowly climbed to approximately $2750/oz at the time of this report.
The drop in Gold prices may have also been influenced by profit-taking after a significant rally the previous week. With the US Federal Reserve’s interest rate meeting scheduled for tomorrow, many market participants might have opted to secure profits in anticipation of potential volatility on Wednesday.
Renewed Focus on Tariff Threats – Bessent vs Trump
Tariff threats resurfaced yesterday, with the Financial Times reporting that new Treasury Secretary Scott Bessent supports a gradual increase in universal tariffs, starting at 2.5% and possibly rising to 20%. President Trump later expressed his desire for even steeper tariffs, contemplating specific taxes on products such as steel and semiconductors.
This approach contradicts market expectations that tariffs would be applied individually, similar to the case with Colombia, rather than universally. Since these proposals are actively being crafted by the Treasury rather than merely suggested by Trump, the US Dollar has experienced significant volatility, evident in the whipsaw price movements of the Dollar Index (DXY).
Upcoming FED Meeting – Extended Pause?
The meeting scheduled for tomorrow is expected to lead to a prolonged pause in rate changes due to ongoing uncertainties surrounding tariffs. Although Fed Chair Powell indicated that policymakers do not factor in the political landscape leading up to the December meeting, the meeting minutes revealed concerns regarding tariffs among policymakers.
The mention of tariffs continues to unsettle markets and bolster the US dollar. However, the real concern for the Fed lies in inflation, as Trump’s recent comments regarding specific taxes on steel, copper, and semiconductors could trigger increased price pressures in the future.
Markets are currently factoring in approximately 48 basis points of rate cuts from the Fed through December 2025.
Source: LSEG (click to enlarge)
Final Thoughts
I continue to maintain a bullish outlook on Gold, primarily due to the uncertainties surrounding tariffs and their potential effects, which will likely keep safe haven demand high. As observed yesterday, the appeal of the US Dollar as a safe haven may be diminishing, with the JPY and CHF performing better during the market turmoil sparked by DeepSeek.
Concerns over geopolitical issues and economic growth may also contribute to supporting Gold prices in the upcoming days and weeks.
Technical Analysis of Gold (XAU/USD)
This analysis continues from the technical insights provided last week.
The breakout following President Trump’s inauguration fell short of all-time highs, with resistance at the 2785 level. The recent selloff did not trigger a trend reversal, as buyers have returned to push prices above the 2750 mark.
Gold (XAU/USD) Daily Chart, January 28, 2025
Source: TradingView (click to enlarge)
When examining the H4 chart, the current trend appears bearish, with a lower high followed by a lower low. Nonetheless, a descending trendline is developing, with the swing high at 2770.
A candle closing above this descending trendline could indicate a retest of the 2770 level before the FOMC meeting.
A 4-hour candle close above the 2770 mark may signal a fresh all-time high for the precious metal.
Be watchful for remarks about tariffs or geopolitical developments from the Trump administration, as these could impact global markets.
Gold (XAU/USD) Four-Hour H4 Chart, January 28, 2025
Source: TradingView (click to enlarge)
Support
Resistance
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