Gold price hits record $2,800 as trade tariffs and weaker dollar fuel demand
Weaker US Dollar fueled gold’s latest price surge
Gold price is at the climax of January 2025 on a high note, posting a year-to-date gain of 6.66%, and setting a new all-time high.
The precious metal soared past its previous peak of $2,790 per ounce, touching $2,800 during late North American trading on Thursday. This upward momentum has carried into Friday, with gold prices oscillating between $2,790 and $2,800, keeping the record high intact.
The surge in gold prices can be attributed to a confluence of economic and geopolitical factors. The specter of new trade tariffs threatened by U.S. President Donald Trump, combined with persistent geopolitical tensions, has driven investors towards gold as a safe-haven asset. Additionally, the anticipation that Trump's protectionist stance might stoke inflation has further solidified gold's role as an inflation hedge.
A weakening US Dollar has also supported gold's ascent, creating a favorable backdrop for further price increases. However, gold’s bullish trend also faces some resistance. The Federal Reserve's recent hawkish pause has introduced a note of caution, slightly elevating US Treasury bond yields and causing some investors to pause before making additional commitments to gold.
Gold price trajectory hinges on US PCE price index data
Gold price dynamics (November 2024-January 2025). Source: TradingView.
Market participants are currently in a wait-and-see mode, particularly with the upcoming release of the US Personal Consumption Expenditure (PCE) Price Index. This data could either confirm the inflationary pressures supporting gold's value or trigger profit-taking if it suggests a cooling of inflation expectations.
Despite these potential headwinds, gold's daily Relative Strength Index (RSI) is not yet in overbought territory, suggesting there might still be room for upward movement. The market is at a crossroads, with investors looking for new catalysts that could either push gold prices higher or lead to a retracement.
The Federal Reserve’s hawkish stance limited gold’s upward movement. Gold traded within a narrow range despite market fluctuations.
