Gold retreats after a fresh all time high on weak Mortgages
- Gold has hit a new all-time high on Wednesday.
- US President Donald Trump blamed Ukraine and committed again to several tariffs.
- Technically, Tuesday’s daily close above $2,910 worked, boosting the Gold price to a fresh all-time high.
Gold’s price (XAU/USD) has printed a fresh record high at $2,945 during the European trading session on Wednesday. The precious metal falls back to flat ahead of the United States (US) trading session after weekly US Mortgage Applications fell by 6.6% over just one week's time. The earlier and fresh all time high cams after United States (US) President Donald Trump had harsh words on Ukraine overnight, just hours after first talks between the US and Russia officials raised concerns among traders if a peace deal is even in the cards. Meanwhile, President Trump confirmed again that 25% tariffs on automobile imports are coming, extending to pharmaceutical and semiconductor imports in addition.
Meanwhile, the Federal Reserve (Fed) is set to release the Federal Open Market Committee (FOMC) Minutes for the January meeting. This could throw a spanner in the works for Gold, as several Fed officials have said in recent weeks that rates are reasonable where they are while some inflationary forces are enough for renewed concerns.
Daily digest market movers: Fed could trash the party
- Mortgate Applications are dropping lower by 6.6% this week. The number boosts a stronger US Dollar and sees Gold falling back to flat from its new all time high printed earlier this Wednesday.
- At 19:00 GMT, the Fed will release its January FOMC Minutes.
- Late Tuesday, US President Donald Trump pledged to impose tariffs on automobiles, semiconductors, and pharmaceutical imports of around 25%, Bloomberg confirmed.
- Turkish Gold miner Koza Altin aims to produce more than 40 tons of Gold in the next five years, the company says in an exchange filing after the market closed on Tuesday, Bloomberg reports.
- The US 10-year benchmark is trading at the high of this week, near 4.57% at the time of writing.
Technical Analysis: The one too many?
Gold is playing a dangerous game on Wednesday after reaching a fresh all-time high above $2,945. With the Fed Minutes for the January meeting being released later in the day, risk is building for an event that might push Gold back lower. From a technical point of view, this could be considered a rejection at the all-time high and might see sellers drive prices further down.
The daily Pivot Points have been reshuffled. The first support is seen at $2,921, which is the daily Pivot Point. It has already served as support during the Asian trading session. Should this level come under threat again, the S1 support at $2,906 could do its duty.
On the upside, the R1 resistance at $2,951 is the first barrier. The R2 resistance at $2,966 is the next level to be reached before considering the $3,000 mark.
XAU/USD: Daily Chart
Tariffs FAQs
Tariffs are customs duties levied on certain merchandise imports or a category of products. Tariffs are designed to help local producers and manufacturers be more competitive in the market by providing a price advantage over similar goods that can be imported. Tariffs are widely used as tools of protectionism, along with trade barriers and import quotas.
Although tariffs and taxes both generate government revenue to fund public goods and services, they have several distinctions. Tariffs are prepaid at the port of entry, while taxes are paid at the time of purchase. Taxes are imposed on individual taxpayers and businesses, while tariffs are paid by importers.
There are two schools of thought among economists regarding the usage of tariffs. While some argue that tariffs are necessary to protect domestic industries and address trade imbalances, others see them as a harmful tool that could potentially drive prices higher over the long term and lead to a damaging trade war by encouraging tit-for-tat tariffs.
During the run-up to the presidential election in November 2024, Donald Trump made it clear that he intends to use tariffs to support the US economy and American producers. In 2024, Mexico, China and Canada accounted for 42% of total US imports. In this period, Mexico stood out as the top exporter with $466.6 billion, according to the US Census Bureau. Hence, Trump wants to focus on these three nations when imposing tariffs. He also plans to use the revenue generated through tariffs to lower personal income taxes.
Author
Filip Lagaart
FXStreet
Filip Lagaart is a former sales/trader with over 15 years of financial markets expertise under its belt.
