Gold Surges on Trump’s Tariffs Delay. Forecast as 04.02.2025
Donald Trump’s tariffs may prompt the US Fed to maintain high rates for an extended period, potentially strengthening the US dollar. If import duties are not imposed, gold will continue to climb, driven by strong demand and the geopolitical situation. Let’s discuss this topic and make a trading plan.
The article covers the following subjects:
Major Takeaways
- The tariff delay has pushed the XAUUSD pair to a record high.
- Gold has posted its best monthly performance since March.
- The US Fed’s rate cut cycle resumption benefits the precious metal.
- Consider buying gold with the targets of $2,875 and $2,910 per ounce.
Weekly Fundamental Forecast for Gold
Gold appeared to realize that Trump’s actions were a strategic maneuver. It briefly retreated following the imposition of 25% tariffs by the White House on trade with Canada and Mexico and 10% on trade with China. However, subsequent telephone conversations between Trump and Claudia Sheinbaum and Justin Trudeau have resolved the situation. As a result, import duties have been postponed, and the precious metal has surged to a new record. High demand, safe haven status, and geopolitical situation are favorable for XAUUSD bulls.
Gold is a commodity, and as such, its price is affected by demand from consumers in key markets. When demand rises, prices fall, and this has been particularly evident in China and India. Historically, the flow of gold from the West to the East has been significant, and this has led to a corresponding decline in XAUUSD quotes. However, since the election of Donald Trump, there has been a notable shift in the gold flow, with the metal now moving from the UK to the US. Investors are loading planes with bullion, and precious metal stocks on COMEX have jumped 75% since the US presidential election to $85 billion, equivalent to 30.4 million ounces.
Comex Gold Inventories Trends
Source: Financial Times.
In contrast, clients in London face a four-to-eight-week delay in bullion shipments from the UK to the US. The issue is not only the higher prices in New York, which create opportunities for arbitrage trading but also investors’ concerns that Donald Trump will impose tariffs on all imports into the US, including gold.
The confluence of robust demand, the uncertainty surrounding Trump’s policies, and the recognition that Donald Trump’s threats are unlikely to end the conflict in Eastern Europe led to a significant surge in the precious metal’s price in January, marking its best monthly performance since March 2024.
Gold Monthly Performance
Source: Bloomberg.
Following the developments with Mexico and Canada, other governments have concluded that Donald Trump may be open to negotiations. It is unlikely that he will use tariffs as a means to raise revenue for the US budget, as this approach is likely to be met with resistance. Instead, the Trump administration may opt for a strategy of bluffing and intimidation to secure advantageous terms.
If this is the case, concerns about soaring inflation in the United States may be unfounded. Import duties are considered pro-inflationary, regardless of the US administration’s claims that suppliers will be compelled to offer discounts, thereby preventing a price surge. A notable example of this is the reaction of US bonds, which signal a rise in inflation expectations well above 3%, followed by a decline.
US Debt Market Reaction to Trump’s Tariffs
Source: Bloomberg.
Weekly Trading Plan for Gold
In the absence of tariffs, the Fed may revert to the cycle of monetary policy easing that commenced in the first half of the year, thereby providing support to the XAUUSD. Long trades initiated at $2,715 per ounce can be kept open. The intermediate targets are at $2,875 and $2,910.
This forecast is based on the analysis of fundamental factors, including official statements from financial institutions and regulators, various geopolitical and economic developments, and statistical data. Historical market data are also considered.
Price chart of XAUUSD in real time mode
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