The gold market is witnessing a dynamic transformation as trade war anxieties fuel the commodity's price movements. Recently, gold prices have regained momentum, buoyed by Chinese stimulus hopes and increased buying activity. This resurgence comes as the People's Bank of China reports an increase in its gold reserves by 0.16 million troy ounces in January. Meanwhile, the US Dollar has strengthened due to escalating trade war concerns sparked by President Trump's tariff threats, keeping investors on edge.
The current situation is marked by contrasting movements across different markets. The AUD/USD pair lingered in negative territory near 0.6250 during the Asian trading session on Monday. Analysts note that the Relative Strength Index (RSI) for gold points north while staying above the midline, currently near 61, indicating potential for further upward movement. The year has just begun, yet markets, analysts, and global policymakers are already grappling with the implications of Donald Trump's second term on the economic landscape.
President Trump announced on Friday his plan to unveil reciprocal tariffs on countries imposing taxes on US imports, scheduled for Tuesday or Wednesday. The announcement has heightened concerns over a potential global trade war. On Sunday, Trump further fueled these tensions by declaring a new 25% tariff on all steel and aluminum imports. This move provided a fresh boost to the Greenback through resurgent haven buying, causing gold prices to pull back from a record high of $2,887.
In the cryptocurrency realm, Bitcoin's price continues its downward trajectory, trading below $96,000 on Monday after a decline the previous week. The broader financial markets are experiencing risk aversion due to mounting trade war fears, reversing the US Nonfarm Payrolls (NFP) data-led decline in the US Dollar late last week.
The NFP report revealed that the US economy added 143,000 jobs in January, falling short of the anticipated 170,000 increase and down from December's 307,000 job creation figure. Despite this, the Unemployment Rate decreased slightly to 4% from 4.1%, while the Labor Force Participation Rate saw a minor uptick to 62.6% from 62.5%.
"Bullion held by the People’s Bank of China rose by 0.16 million troy ounces last month," – Bloomberg
The next significant target for gold prices is set at the $2,900 mark, with expectations that surpassing this level could lead to testing the psychological benchmark of $2,950. Investors are closely monitoring these developments as they navigate the volatile financial landscape.