Gold extended its rally on Tuesday, climbing above $2,720 per ounce, as market participants react to the potential economic impact of U.S. President Donald Trump’s policies.
Market participants remain cautious as Trump indicated plans to impose 25% tariffs on Mexico and Canada, with speculation mounting over possible tariffs on China in the near future.
These proposed tariffs could escalate trade tensions, prompting traders to seek gold as a safe-haven asset amid rising economic uncertainty. Any further trade disputes could disrupt global supply chains, enhancing gold’s appeal in risk-averse portfolios.
Trump’s fiscal agenda, which includes tax cuts and increased government spending, is expected to fuel inflationary pressures. This presents a challenge for the Federal Reserve, as persistent inflation could constrain the central bank’s ability to lower interest rates.
Higher interest rates typically reduce the attractiveness of gold, which does not yield interest, potentially capping further gains if the Fed opts for a more hawkish stance. Traders are closely watching economic data to gauge how the Fed will balance inflation risks against economic growth concerns.
Beyond trade policy, international disputes continue to underpin gold’s strength. Traders are monitoring the situation in the Middle East, where the recent ceasefire agreement between Israel and Hamas remains fragile. The uncertainty surrounding its implementation adds an additional layer of support for bullion prices as a risk-hedging tool.
As of January 21, 2025, XAUUSD closed at 2724.01, reflecting an upward movement with a high of 2727.08 and a low of 2702.87, indicating strong bullish momentum.
Picture: XAUUSD continues its bullish trend amid strong momentum and moving average support, as seen on the VT Markets app.
Immediate support is established at 2702.00, where previous price consolidation occurred. A breakdown below this level may open further downside to the recent low at 2689.39.
The key resistance level is now at 2727.00, which aligns with the session’s high. A successful breach could lead to testing the next psychological level at 2750.00, with potential further bullish continuation.
Short-term traders should watch for a breakout above resistance, while cautious of potential retracements toward support zones. Momentum remains strong, but consolidation phases are likely before further gains.
Gold’s bullish momentum is likely to persist in the near term, driven by escalating trade and international tensions. However, inflation concerns and Fed policy decisions could introduce volatility, requiring traders to remain cautious about potential pullbacks.
Market participants will closely watch Trump’s policy announcements and upcoming economic data releases for further direction in the gold market.
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