Gold surge to record levels amid Trump’s tariff and Fed policy

Gold (XAU/USD) prices surged to a new record high of $2,830 before retracing from this level. This decline occurred as investor confidence improved. US President Donald Trump temporarily paused tariffs on Mexico and Canada, boosting market sentiment. The Federal Reserve recently announced a hawkish pause in its policy. This decision led to a rise in US Treasury bond yields. As a result, the US Dollar (USD) strengthened, putting downward pressure on gold prices. However, despite this, the ongoing uncertainty in financial markets is likely to keep gold prices elevated in the short term.

Fundamental overview: Drivers behind Gold's movement

Recent global developments have influenced gold’s price action. Trump's announcement of a temporary tariff pause for Mexico and Canada boosted market sentiment. This reduced the demand for safe-haven assets like gold. Simultaneously, last week, the Federal Reserve's hawkish stance on interest rates provided further momentum for the USD. Higher Treasury bond yields supported the greenback, which inversely impacted gold prices.

Nevertheless, the downside for gold appears limited due to persistent concerns over Trump’s trade policies. These policies raise fears of a global economic slowdown. They also increase concerns about higher US inflation. This may boost gold's appeal as a hedge against inflation. Economic data supports this outlook. The ISM Manufacturing PMI rose to 50.9 in January, signaling growth. Inflation indicators, such as the Prices Paid Index, also increased significantly. These developments suggest that gold remains an attractive asset in the long term, even amid short-term corrections.

Technical insights: Resistance and trade opportunities

Gold’s technical analysis highlights key resistance and support levels. The first chart shows that XAU/USD is trading within an ascending channel. A resistance zone is clearly defined near the upper boundary. Recent price action indicates that gold has tested this resistance multiple times. However, it has failed to break above it decisively. This signals a potential pullback in the short term.

A recent trade example demonstrates an effective strategy during uncertain times in the second chart. The entry point for this trade was at $2,758, with a raised stop loss at the same level to mitigate risk. The target price was set at $2,815, yielding a profit of $57 per ounce. This trade underscores the importance of clear entry and exit strategies when trading gold in volatile conditions. Utilizing defined support and resistance levels within the ascending channel can help traders capitalize on market movements.

How to trade Gold during uncertainty

Given the current market environment, traders should adopt a cautious approach. The ascending channel helps identify buying opportunities near support levels. Traders should also remain cautious of resistance zones. Fundamental factors play a key role. Trump’s trade policies and upcoming US economic data releases, such as JOLTS and Factory Orders, should guide decision-making.

Short-term traders may look to capitalize on intraday fluctuations by using tight stop losses to protect against unexpected volatility. Long-term investors, on the other hand, should monitor inflation data and geopolitical developments, which could drive gold prices higher in the coming months.

Conclusion

Gold’s price action reflects a delicate balance between fundamental drivers and technical signals. The strengthening US Dollar and improved risk sentiment put pressure on prices. However, long-term inflation concerns and global trade uncertainties provide support. The ongoing uncertainty from the Trump’s tariffs suggest limited downside in gold. Traders should stay cautious. They can use technical insights from ascending channels. Monitoring upcoming economic data is crucial for informed decision-making.

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