Key points:
- Gold rises 2% to break triple top
- Trump’s policies underpin rally
- Bullion 2% away from record
Precious metal turned up as investors reacted to Trump’s tariff plans, which are likely to flare up inflation, leading to interest rates that may stay higher for longer. Let’s break it down.
🗽 Donald Trump Kicks Off Presidency
- Gold prices
XAUUSD pumped nearly 2% on Tuesday and extended the swing early Wednesday to $2,750 per ounce as markets were reacting to Donald Trump’s first moves in office. The 47th President of the US signed more than 200 executive orders on his first day at the job, sending investors scrambling, gold bugs included. - The precious metal broke a triple top technical formation underpinned by the expectations that Trump’s lofty tariffs (which may take a while to balloon) would cause inflation to spike again, after yearslong battle to stamp it out.
🏛️ Will the Fed Lean Against the Economy?
- And that’s something the Federal Reserve might not like. Rising price pressures might prompt Fed officials to walk back comments of interest rate cuts in efforts to curb the potential price growth. While this is all mere speculation now, gold traders are preparing to see it materialized sooner or later.
- Gold typically acts as a hedge against inflation but also it gets more attractive as the US dollar appreciates, which is the expected outcome of the tariffs plan.
🧈 Bullion Zeroes In on Record High
- At his last meeting of 2024, Fed chair Jay Powell said that the US central bank was eyeing two trims to borrowing costs this year. But since the Fed is data dependent, and officials are allowed to change their mind, there may not be two cuts if inflation starts flashing warning signs.
- Hence the run to gold — bullion is now less than 2% away from its record high of $2,790 per ounce. The high-water mark was set back in October as the Middle East conflict was still sending shockwaves across markets.
