28 Jan 2025

Gold remains stagnant on Tuesday following the market downturn experienced on Monday, leaving bullion investors to recover from their losses. President Trump leveraged the Nvidia correction to reinforce his advocacy for the implementation of global tariffs. Consequently, the chances of achieving a new all-time high in Gold are diminishing.

Gold's price (XAU/USD) remains under pressure and has yet to recover from the decline experienced on Monday, currently trading at approximately $2,743 as of Tuesday. This follows a drop of over 1% the previous day, triggered by market disruptions caused by the Chinese AI startup DeepSeek. The impact has been significant, with Nvidia alone witnessing a loss exceeding $550 billion in market capitalization. Given the sensitivity of the technology sector, cryptocurrencies like Bitcoin have also suffered, with Bitcoin (BTC) experiencing a decline of more than 6.5% at one point, making it one of the casualties in the broader financial markets.

This situation appears to benefit United States President Donald Trump, who has reiterated his call for global tariffs. The rationale behind this demand is to better protect US technology firms and insulate them from China's competitive pricing strategies. It is important to note that tariffs are generally inflationary, which can lead to increased yields, presenting a challenge for bullion.

This week, the Federal Reserve (Fed) and the European Central Bank (ECB) are scheduled to make decisions regarding policy interest rates, with the Fed's announcement set for Wednesday and the ECB's for Thursday.

Daily digest market movers: Push and pull on tariffs

Asian markets are expected to experience a lull this week and the next. With the Lunar New Year commencing this Tuesday, Chinese traders are anticipated to return to the markets on February 5.

According to a report from the Financial Times, Treasury Secretary Scott Bessent is advocating for universal tariffs on U.S. imports, starting at 2.5% and increasing gradually, as per unnamed sources. President Trump has since expressed a desire for broader tariffs that are “much larger” than the proposed rate, as reported by Bloomberg.

The CME FedWatch tool indicates that no changes are expected in the policy rate during Wednesday's Federal Reserve interest rate decision. Looking ahead, the likelihood of a 25 basis point rate cut in the May decision stands at 40.0%, while the probability of maintaining the current rate is at 51.5%.

Barrick Gold (ABX CN) and the government of Mali are set to initiate new negotiations on Tuesday. The discussions aim to address a dispute regarding the alleged non-payment of taxes and the confiscation of Barrick’s gold stocks by local authorities, as reported by Reuters.

Technical Analysis: Treasury confirms tariffs

Gold's recent price surge has encountered a setback, indicating a potential need for additional support on the downside. The markets were caught off guard by President Trump's recent actions, which included imposing tariff threats on Colombia over the weekend and reintroducing the possibility of universal tariffs. These inflationary pressures stemming from the tariffs could lead to increased yields and potentially no interest rate cuts in 2025, creating challenges for Gold.

The primary support level is identified at $2,721, which corresponds to a double top formation observed in November and December, breached on January 21. Just beneath this level, the focus shifts to $2,709, the low recorded on October 23, 2024, serving as a secondary support. Should both of these levels be compromised, a significant decline back to $2,680 may occur, resulting in a pronounced sell-off.

While the opportunity for a rebound is diminishing, Gold still has the potential to reach its all-time high of $2,790, which is approximately 2% above current levels. Surpassing this threshold would pave the way for a new record high. In the meantime, some analysts and strategists have projected targets of $3,000, although $2,800 appears to be a more immediate resistance level to watch for upward movement.