Gold Reaches New Record Highs as Trump Reiterates Threat of Tariffs

Gold is on track for its best monthly performance since March last year as sentiment remains strong and participants consider the possible influence of American politics. Both it and the dollar remained strong this week as the Federal Reserve (‘the Fed’) held rates and the European Central Bank (‘the ECB’) cut as expected. This article summarises the latest news and rumours affecting major markets this week then looks briefly at the charts of XAUUSD and EURUSD.

The Fed held rates at the current 4.25-4.5% on 29 January as almost universally expected, stressing the importance of progress on inflation before more cuts. The likelihood of another hold in March has now increased further to around 85% according to CME FedWatch.

The job market in the USA remains generally strong and there’s no indication of an upcoming recession based on GDP or other economic indicators. Significantly, the Fed’s statement had the reference to progress towards the target for inflation of 2% removed. This might suggest that the Fed sees the current rising inflation as part of a relatively new trend as opposed to just a few months of outlying results.

The ECB made a single cut to its main refinancing rate, also very widely expected, taking it to 2.9%. The next meeting on 6 March is also likely to feature a cut. Annual headline inflation is half a percent lower in the eurozone compared to the USA and the ECB forecasts a decline to 2% by the end of the year. This gives the eurozone’s central bank more room to cut rates compared to the Fed, but a significant difference in rates between the euro and dollar could expose the former to more losses.

Donald Trump recently confirmed plans to introduce 25% tariffs on various Canadian and Mexican imports while considering a 10% tariff on Chinese goods. Markets widely expect significant new tariffs, so this isn’t a big surprise in itself, but details about how much they tariffs will cost and which products they’ll affect are key. Traders are awaiting announcements of confirmed details.

Euro-dollar Rejects $1.05 for Now

The euro has been weak against the dollar in recent months due to diverging monetary policy but also a worse economic outlook in the eurozone. Recent job data and GDP from the eurozone have been mostly negative while the American economy looks strong overall. Threatening tariffs on imports to the USA have affected sentiment, but there’s been no confirmation yet as to how much they might be or which European products will be affected.

The 50 SMA from Bands has been an important technical reference for the last couple of weeks. The price is currently testing a move below it. Although the move above $1.05 amid overbought hasn’t been successful, it’d be possible to see a retest of that area depending on the results of the NFP on 7 February.

To the downside, parity still seems like an excessively aggressive target. $1.02 might be more realistic in the next few weeks; this seems to be an important area based on the fairly strong reaction on 13 January.

Gold Hits $2,800 but Immediate Continuation is Questionable

Havens in general and gold in particular have been popular in 2025 so far as the new American tariffs loom. However, the main factor driving gold up still seems to be extremely strong overall sentiment. The Fed’s pause of rate cuts and generally good economic conditions in the USA make gold’s fundamentals somewhat shaky while recent nervousness in stock markets is a positive factor for the yellow metal.

Most of the time, when an instrument reaches a significant new area under conditions of strong sentiment, one would expect either continuation or consolidation; a retracement is less likely in this scenario. Consolidation seems to be favourable for gold now because it’s strongly overbought based on both the slow stochastic and Bollinger Bands while there hasn’t been a significant uptick in buying volume or ATR.

$2,720 is an obvious candidate for static support: this area was a resistance last quarter, tested twice unsuccessfully then. Equally, dynamic support might come from the 20. 50 and 100 SMAs. A significant retracement lower seems very unlikely for now, but traders should monitor political news from the USA and 7 February’s NFP.

This article was submitted by Michael Stark, an analyst at ExnessExness.

The opinions in this article are personal to the writer. They do not reflect those of Exness or FX Empire.