By Dr. Renisha Chainani, Head- Research, Augmont – Gold for all
Amid trade tensions, gold surged past $2860 (~Rs 83300) last week, hitting new all-time highs and rising more than 7% in January. Gold is 100% proportionally correlated with uncertainty. And this is the most uncertainty we’ve seen in a long time.
FED keeps interest rates steady
Following three consecutive rate cuts in late 2024, the Federal Reserve decided to pause its rate-cutting efforts and maintain interest rates in the 4.25% to 4.50% target range during its January 29 meeting. Policymakers noted that inflation is still “somewhat elevated,” indicating ongoing difficulties ahead, even though this decision shows confidence in the economy’s resiliency. Powell also discussed tariff uncertainties, characterizing the possible effects as extremely unknown.
Tariff fears level up COMEX inventories
Traders have moved $82 billion worth of gold from the Bank of England’s vaults to private U.S. vaults and New York’s Comex exchange due to concerns about Trump tariffs. Fears that Trump’s tariff policies would eventually apply to gold have been the driving force behind this. Since the outcome of the US presidential election in late 2024, the US gold market has been trading at a premium to the London market. This occasionally occurs in markets all across the world. Gold traders and financial institutions have placed 393 metric tonnes into the vaults of the COMEX commodity exchange in New York in the weeks following the U.S. election in early November, increasing its inventory levels by nearly 75% to 926 tonnes, the largest level since August 2022.
Trump Tariff announcement
To combat the illegal fentanyl trade, US President Donald Trump formally imposed new tariffs on imports from Canada, Mexico, and China on February 1. While China said it would challenge tariffs at the World Trade Organization and take unspecified countermeasures, Canada and Mexico ordered retaliatory measures, and imports from Canada and Mexico will be subject to a 25% tariff and imports from China will be subject to a 10% tax.
Buy on rumour and sell on news.
After hitting an all-time high last week due to rumours, the price of gold dropped by almost 1% today as the U.S. dollar strengthened on growing concerns of a global trade war following U.S. President Donald Trump’s sweeping tariff measures. Markets are shaken by the tariff dramas, and demand for safe-haven assets like gold could look to limit the immediate downside, though the soaring U.S. dollar could be an inhibiting factor. However, it appears that the decline could be temporary, as any trade escalation may likely spark renewed interest.
Several unknowns, such as the length, scope, and targets of the tariffs, potential retaliation, and the potential economic repercussions that could impact consumers, will determine the future course of bullion.
Technically, the gold market has been in an overbought zone, so if April Futures prices hold below $2800 (~Rs 81800), we may see a retracement up to $2755 (~Rs 80600) and $2720 (~Rs 79600).
Gold Apr Futures Daily Chart
For Silver, $33(~Rs 94000) is a very difficult level to crack. If March Future prices don’t sustain above $32, there are high chances of it again retracing back to the $30 (~Rs 90000) floor.
Silver Mar Futures Daily Chart
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