- Gold rebounds from lows, benefiting from safe-haven demand amid Trump's trade stance and US stock volatility.
- New Treasury Secretary Bessent proposes 2.5% starting tariffs; Trump seeks higher, escalating trade war fears.
- Markets cautious ahead of FOMC meeting; Fed likely to hold rates, monitoring trade policies and economic signals.
Gold prices bounced off after refreshing four-day lows and rose on Tuesday as United States (US) equities recovered following Monday’s sell-off, while the precious metal benefited from safe-haven flows. Trade comments by US President Donald Trump keep investors nervous, which turned to the yellow metal, as XAU/USD is seen changing hands at $2,763, up by 0.88% at the time of writing.
Scott Bessent, appointed by Trump as US Treasury Secretary, was approved by the Senate. He said that he supports universal tariffs on imports, which would start at 2.5% and could be gradually increased. However, Trump said that he wants much larger tariffs, adding that if companies don’t like duties, they should produce in the United States.
Trump added fuel to the “trade war” saying that he will apply tariffs to chips, pharmaceuticals, steel, aluminum and copper. After those comments, Bullion consolidated near the $2,730 – $2,744 range before rallying past the $2,750 figure as traders eyed the record-high at $2,790.
Safe-haven flows boosted the Greenback, as the US Dollar Index (DXY) hit a daily peak at around 108.05 before reversing to 107.92 and it is now up 0.47%.
Data-wise, US Durable Goods Orders were mixed, as total figures contracted deeper for the second straight month, while core orders improved, according to the US Department of Commerce. The Conference Board (CB) revealed that Consumer Confidence deteriorated in December, as Americans are concerned about the labor market.
Ahead of the week, the US Federal Open Market Committee (FOMC) has begun its two-day meeting, in which the Federal Reserve (Fed) is expected to hold rates as the disinflation process has halted. This, along with Trump’s 2.0 controversial trade policies, suggests that Fed officials could be patient in assessing its impact on monetary policy.
Daily digest market movers: Gold price climbs above $2,750 amid strong US Dollar
- Gold prices rose as US Real yields remain firm. The 10-year Treasury Inflation-Protected Securities (TIPS) yield sits at 2.128%, unchanged on Tuesday.
- The US 10-year Treasury bond yield edges up one bps during the day to 4.538%.
- US Durable Goods Orders fell sharply by -2.2% MoM in December, significantly missing the expected 0.8% increase and worsening from November’s -2% decline.
- The Conference Board reported that US Consumer Confidence dropped to 104.1, falling short of analysts’ expectations of 105.6. All five components of the index showed deterioration.
- Money market futures, based on CME FedWatch Tool data, have priced in 54 basis points of Federal Reserve rate cuts for 2025.
XAU/USD technical outlook: Gold surges towards $2,770 as bulls target ATH
Gold prices are trying to resume their ongoing uptrend after a day in which XAU/USD lost more than 1% amid Trump’s trade rhetorics. He even went further late on Monday, which sparked XAU/USD’s jump above $2,750, opening the door for bulls to open fresh long positions as they eye the record-high at $2,790.
If XAU/USD surpasses $2,790, it could challenge the $2,800 figure. Psychological levels like $2,850 and $2,900 would follow.
On the other hand, if bears moved in and pushed Bullion prices below $2,750, the next support would be the confluence of 50and 100-day Simple Moving Averages (SMAs), each at $2,663 and $2,658. If surpassed, the 200-day SMA at $2,524 would follow.
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
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