By Dr. Renisha Chainani, Head- Research, Augmont – Gold for all
Gold has risen more than 3% and Silver by 7% in January till date supported by safe-haven demand amid political and economic uncertainties. The main factor supporting prices is the speculation of President-elect Trump imposing tariffs after his inauguration ceremony on 20th January.
Upon taking office, Trump indicated that he would enact a wide range of tariffs, such as a blanket tariff of 10–20% on all imported goods, an additional tariff of 60–100% on Chinese goods, a 100% tariff on BRICS nations if they try to challenge the U.S. dollar’s position as the world’s reserve currency and a 25% tariff on all goods imported from Canada and Mexico. Notably, he intends to apply at least a portion of these tariffs right away. In support of the “Make America Great Again” agenda, proponents of tariffs claim that these policies will restore jobs to the US.
Additionally, tariffs are a geopolitical stick in Mr. Trump’s case. Threatening Mexico, Canada, and other nations with tariffs is one way his administration coerces them into helping with internal problems in the United States, such as drug smuggling and illegal immigration from Mexico. Tariff increases would be detrimental to the American economy and its trading partners. A fresh tariff increase would result in economic repercussions globally, considering the pivotal role of the U.S. economy in the global marketplace. A trade war in which the United States faces retaliation from major trading partners through their tariff increases would be a more worrisome situation.
Trump’s inauguration and expected trade policies, which could lead to inflation and conflicts in international commerce, are being eagerly watched by traders. Given their ability to upend international markets, broad tariffs put forth by the new administration are seen to be one of the possible factors contributing to gold’s appeal as a safe-haven. As investors look for protection against negative risks resulting from policy uncertainty, these worries have led to an increase in hedging activity.
The short-term outlook for gold is still favourable due to tariff uncertainty, but maintaining these gains will need further Fed rate cuts and ongoing dollar weakening. Trump’s policy announcements should be watched by investors for possible effects on the market.
Another focus this week is the Bank of Japan’s Interest Rate decision on January 24. Recent inflation and wage figures look promising and back its plan to increase interest rates at this week’s meeting.
Technically, Gold has given a breakout from its symmetrical Triangle at Rs 78500. This week we are likely to see this uptrend continuing and gold breaking its previous record high of $2800 (Rs 80,000).
Gold Feb Futures Daily Chart
Similarly, Silver has been consolidating in the descending triangle with support at Rs 87000 and resistance at Rs 94000. Prices need to sustain above $31 (Rs 94000) and breakout of this triangle to continue its uptrend towards Rs 96000 and beyond.
Silver Mar Futures Daily Chart
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