Gold (XAUUSD) declined below $2,780 per ounce, touching a session low of $2,772.23, before recovering slightly to close at $2,783.90. The intraday high reached $2,807.08, but selling pressure intensified as traders booked profits following last week’s all-time high of $2,799.47.
The metal initially found support following Donald Trump’s new tariff announcement, which imposed a 25% tariff on imports from Canada and Mexico and a 10% tariff on Chinese goods, set to take effect on Tuesday.
Other analysts said the tariffs could throw Canada and Mexico into recession and usher in 'stagflation' — high inflation, stagnant economic growth and elevated unemployment — at home https://t.co/QsRVTVFBaJ 7/7
— Reuters (@Reuters) February 3, 2025
Typically, rising trade tensions fuel demand for safe-haven assets like gold, as traders seek stability in uncertain market conditions. However, the metal’s gains have been capped by the strengthening U.S. dollar, which continues to dominate market sentiment.
A stronger dollar makes gold more expensive for foreign buyers, leading to reduced demand. Inflation concerns tied to the tariffs could keep interest rates elevated for longer, making non-yielding gold less attractive compared to interest-bearing assets. While tariffs are expected to stir market volatility, gold’s trajectory remains uncertain, with its ability to sustain upward momentum dependent on whether trade fears outweigh the dollar’s continued strength.
Gold’s pullback was also driven by profit-taking, as traders locked in gains after the recent surge to record highs. The failure to hold above $2,800 prompted short-term selling, pushing prices toward the $2,775 support zone.
Picture: XAUUSD retreats from 2817 after strong rally, finding support near 2772 amid shifting market sentiment, as seen on the VT Markets app.
Immediate support sits at $2,772.23, Monday’s intraday low. A break below this level could push gold toward the $2,760–$2,765 range, where buyers may look to step in. On the upside, resistance is at $2,807.08, the session high, with a move above this level potentially triggering a test of $2,817.13, where gold faced resistance earlier in the day.
The MACD signals bearish momentum, indicating downside pressure remains in play. However, signs of stabilisation at lower levels suggest the potential for consolidation before the next decisive move. Traders will be watching closely for a breakout in either direction as market sentiment unfolds
Gold’s direction remains closely linked to the strength of the U.S. dollar and Federal Reserve expectations. Further dollar gains could weigh on gold in the short term, making it less attractive to foreign buyers. Additionally, a hot U.S. inflation report may delay Fed rate cuts, further dampening gold’s appeal as higher interest rates make non-yielding assets less favorable.
However, ongoing trade tensions and tariff-related uncertainties could keep safe-haven demand intact, preventing deeper declines. Market participants will closely watch U.S. inflation data and central bank guidance, which will ultimately dictate gold’s next move.
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