Gold continues its historic rally, trading near $2,895 per ounce as President Trump's announcement of sweeping steel and aluminum tariffs amplifies global market uncertainty. The precious metal has gained 2.2% last week, with market sentiment increasingly favoring safe-haven assets amid rising trade tensions.
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Trump's planned implementation of 25% tariffs on all steel and aluminum imports has intensified market concerns about global trade disruption. This development, coupled with threats of 100% tariffs on BRIC nations if they diversify from the dollar, has significantly boosted gold's safe-haven appeal.
Central Bank Activity
China's central bank has demonstrated continued commitment to reserve diversification, expanding its gold holdings for the third consecutive month in January despite historically high prices. Additionally, a groundbreaking pilot program now allows ten major Chinese insurers to invest up to 1% of their assets in gold, potentially unleashing approximately $27.4 billion in new investment demand.
Gold Purchases by China's Central Bank. Source: Bloomberg L. P.
Market Dynamics
While institutional demand remains robust, Chinese consumer appetite has shown signs of weakening due to record prices and economic headwinds. The Shanghai premium has turned to a discount over the past six months, though investment in bars and coins remains resilient amid stock market volatility and ongoing property sector concerns.
Near-Term Outlook
Market attention will focus on Federal Reserve Chair Powell's congressional testimony this week for monetary policy insights. While strong economic data suggests the Fed may delay rate cuts – traditionally bearish for non-yielding gold – analysts believe broader geopolitical uncertainties and inflation concerns will continue supporting prices. Westpac's Richard Franulovich notes that gold "remains in a sweet spot" with few immediate obstacles to further gains.
Market Implied Rate Cuts. Source: Bloomberg
GOLD (D1 Interval)
Gold is currently trading at its all-time high (ATH). Bears will attempt to retest the previous high at $2,790, while bulls may target the 161.8% Fibonacci retracement level at $2,948. Key support is set at the 78.6% Fibonacci retracement level, which coincides with the 30-day SMA. The RSI is showing bullish divergence in the overbought zone. Previously, a higher high in this zone led to a slower pace of gains or a possible correction. Meanwhile, the MACD continues to signal bullish momentum. Source: xStation
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