By Dr. Renisha Chainani, Head- Research, Augmont – Gold for all
The gold market is on track for its greatest monthly performance since September and is having its best start to the year since 2023 as prices test the upper end of their range near $2790 (~Rs 80300). Despite an approximately 27% rally in the last year, the precious metal has a strong start to the year.
Trump’s 2.0 innings begin.
De-globalization has begun and appears to be accelerating, particularly as the U.S. attempts to impose conditions that benefit itself. “America First” policies and high tariffs may benefit the U.S., but they also undermine confidence in a nation that ought to be setting an example for free market economies. This new phenomenon is likely to fuel inflationary pressures and possibly trigger a wave of devaluations in other nations to offset the tariffs. The Trump administration may usher in a new era of government stimulus and more loosened monetary policy.
Trump Tariff Threat
By February 1, Trump, the self-described “Tariff Man,” intends to levy 25% tariffs on Canada and Mexico. Additionally, he threatened to impose broad, universal tariffs on all imports entering the United States, thereby starting an economic war with the rest of the globe.
The dollar’s decline in response to Trump’s comments that he would soften tariffs and accept a trade agreement with China has coincided with gold’s ascent to a new all-time high. Trump stated earlier this week that if an agreement on Ukraine is not achieved, he would probably slap further penalties, levies, and tariffs on Russia. Because of the uncertainty around the effects of Trump’s proposed tariffs and immigration policies, traders continued to gravitate toward safe-haven assets.
Trump Demands Lower Interest Rates
President Donald Trump of the United States made his first shot at the Federal Reserve’s monetary policymaking since taking office three days ago on Thursday, saying he would insist that interest rates be cut quickly and that other nations should do the same. Because the central bank sets monetary policy and is expected to release its interest rate decision next week, traders are apprehensive even though lower borrowing costs are generally positive for precious metals.
Trump’s plan to tackle Inflation
Tax cuts, deregulation, and interest rate reductions are the three primary pillars of Trump’s strategy, which aims to lower costs for both consumers and corporations. Many economists and investors believe that Trump’s intention to deport a substantial number of undocumented immigrants and his pursuit of large-scale tariffs on America’s trade partners—which are effectively levies on imports—run a danger of rekindling inflation pressures.
Amidst indications of reducing inflationary pressures in the US, the markets began factoring in the potential for the US central bank to cut interest rates twice before the end of this year.
Gold Feb Futures Daily Chart
Technically, Gold had given a breakout from its symmetrical Triangle at Rs 78500 last week. And as suggested, gold almost touched the target of the previous record high of $2800 (Rs 80,000). Clearing this level now opens the ceiling to the next psychological level of $2850 (Rs 81600) and $2900 (Rs 82800).
Silver Mar 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.
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