Gold prices surged more than 1% on Tuesday, buoyed by safe-haven demand amid growing uncertainty over President Donald Trump’s controversial trade policies. The XAU/USD is currently trading at $2,933, recovering from daily lows of $2,892.
Markets remain rattled after Trump’s recent imposition of tariffs on steel and aluminum imports and the announcement of reciprocal duties. As a result, bullion prices are positioning themselves to challenge recent record highs, after reaching $2,942 on February 11.
Goldman Sachs Revises Price Forecast
Goldman Sachs has revised its year-end gold price target to $3,100 per ounce, citing “structurally higher” central bank demand. The investment bank believes that this increasing demand could add 9% to the price of gold, further supporting the yellow metal’s upward momentum.
Gold’s Rally Post-Trump Victory
Following Trump’s victory on November 6, gold initially dipped to $2,534 before rallying by over 15.90%, driven by haven demand and central bank buying. The World Gold Council (WGC) reported that central banks purchased 333 tonnes of gold, an increase of over 54% year-on-year, following Trump’s victory. This increased buying trend is expected to continue, offering solid support for gold prices.
Concerns Over Inflation and Federal Reserve Policy
While gold’s rally has been impressive, traders should be mindful of the Federal Reserve’s stance on inflation. After five consecutive months of rising Consumer Price Index (CPI), Fed officials, including San Francisco Fed President Mary Daly, have become slightly skeptical about achieving the Fed’s inflation targets. Daly has stated that policy needs to remain restrictive until meaningful progress is made on inflation.
Market participants are keenly awaiting the January Federal Open Market Committee (FOMC) meeting minutes, housing data, Initial Jobless Claims, and S&P Global Flash PMIs for further insight into the Fed’s future policy moves.
Market Movers Affecting Gold
US Treasury Yields: The 10-year Treasury bond yield has climbed by seven basis points to 4.55%. Rising real yields (currently at 2.086%) typically present a headwind for gold, as they make the non-yielding asset less attractive in comparison to interest-bearing investments.
Fed Officials’ Views: Fed Governor Christopher Waller has expressed that Trump’s trade restrictions are unlikely to significantly impact gold prices. However, Philadelphia Fed President Patrick Harker has maintained support for a steady interest rate policy, noting persistent inflationary pressures.
XAU/USD Technical Outlook: Bullish Momentum
Gold’s upward trend continues, with buyers eyeing key resistance levels at $2,942 (the all-time high), $2,950, and the psychological $3,000 mark. Should gold break above these levels, Goldman Sachs’ forecast of $3,100 by year-end remains plausible.
However, for a bearish continuation, sellers will need to push the gold price below $2,900. In that case, key support levels would come into play, including the February 14 low of $2,877, followed by $2,864 and potentially even $2,790, which is the swing high from October 31.
Conclusion
The surge in gold prices is largely driven by increased demand for safe-haven assets amid economic uncertainty and trade tensions. With Goldman Sachs forecasting a rise to $3,100 by the end of the year, gold’s appeal as a hedge against volatility remains strong. However, market participants should remain vigilant of any shifts in Fed policy and global economic developments that could impact gold’s trajectory.
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