Gold Prices Surge Towards $2,790: Can XAU/USD Break Its All-Time High?

Gold Prices Surge Amid Policy Uncertainty and Dollar Weakness

Gold prices have climbed sharply, trading near a recent peak of $2,764.50 per ounce for February futures and $2,751.05 per ounce in the spot market. These gains position the precious metal within striking distance of its all-time high of $2,790.15, as market participants assess policy risks under U.S. President Donald Trump and a softening U.S. dollar. The continued volatility and macroeconomic uncertainty have underscored gold's role as a safe-haven asset.

Trump’s Trade Policies Add Fuel to Gold’s Rally

President Trump’s potential tariffs on goods from China, Canada, and Mexico have introduced heightened market risks, driving investors toward safe-haven assets like gold. The administration is reportedly weighing a 10% tariff on Chinese imports and a 25% tariff on goods from Mexico and Canada, citing trade imbalances and security concerns. This aggressive stance has contributed to dollar weakness, a significant tailwind for gold prices, as the U.S. Dollar Index dropped 1.24% earlier in the week before stabilizing.

Market analysts suggest that the tariffs could lead to inflationary pressures, prompting the Federal Reserve to maintain elevated interest rates, which might dampen gold's non-yielding appeal. However, central bank purchases and rising investment demand provide a robust counterbalance to these potential headwinds.

Central Bank Activity and Investment Demand Drive Bullish Momentum

Central banks have continued to stockpile gold, reflecting a broader strategy of hedging against geopolitical and economic instability. Recent data from the World Gold Council highlights robust central bank purchases, a trend expected to persist into 2025. Simultaneously, investment demand remains a key driver, with exchange-traded funds and institutional investors increasing their exposure to the precious metal.

ANZ analysts project that investment demand will counteract any declines in physical consumption, ensuring stable price support. With inflationary pressures from tariff policies and fiscal concerns in the U.S., gold’s allure as a hedge remains strong.

Dollar Weakness and Treasury Yields Provide Support

The U.S. dollar’s decline to near two-week lows has made gold more attractive to international buyers, further lifting prices. Treasury yields have remained flat, reflecting cautious market sentiment as investors await clarity on Trump’s economic policies. The Federal Reserve’s upcoming meeting will likely provide additional insights into monetary policy adjustments, influenced by these macroeconomic factors.

Kelvin Wong, Senior Market Analyst at OANDA, highlights the interplay between the dollar’s trajectory and gold prices, stating that uncertainty around tariff implementation remains a “primary catalyst” for the bullish tone in gold.

Technical Outlook: Key Levels to Watch for XAU/USD

From a technical perspective, XAU/USD exhibits strong upward momentum. The current trading level near $2,751.89 places gold within a tight range to challenge its October record. Analysts point to $2,726.30 as critical support, with resistance at $2,790.15—a break above which could signal a fresh rally.

However, a fall below $2,693.40 might indicate a shift in momentum, cautioning traders to remain vigilant. Daily charts reveal consistent buying pressure, suggesting sustained bullish sentiment in the near term.

Supply Concerns and Gold’s Scarcity

The scarcity of new gold reserves continues to underpin long-term price appreciation. Industry leaders note that global gold reserves have dwindled by nearly 40% over the past 12 years, compounded by rising production costs. Large operators such as Barrick Gold and Newmont are increasingly reliant on acquisitions to maintain output, emphasizing the strategic value of junior mining firms with untapped resources.

Alastair Still, CEO of GoldMining Inc., underscores gold’s intrinsic scarcity, stating, “Unlike cryptocurrencies, you can’t create more gold. Its finite supply is what gives it lasting value.”

Inflation Risks and Geopolitical Tensions

Trump’s policies, including reshoring initiatives and new tariffs, are likely to accelerate inflation, further boosting gold’s appeal. Concerns over fiscal deficits—now exceeding $710.9 billion for the last quarter—add another layer of uncertainty. As geopolitical tensions persist, particularly around trade and regional conflicts, gold's safe-haven demand is expected to remain elevated.

Outlook: Can Gold Break New Records?

With gold prices steadily climbing, the question remains: Can XAU/USD surpass its all-time high of $2,790.15? Given the confluence of macroeconomic factors, including inflationary risks, dollar weakness, and central bank support, the outlook appears cautiously optimistic. Analysts forecast further gains, provided that key support levels hold and market conditions remain conducive to safe-haven demand.

As global uncertainties deepen, gold’s trajectory highlights its enduring role as a hedge against economic instability. The metal's potential to reach new highs reflects both its fundamental value and its capacity to adapt to a rapidly changing financial landscape.

That's TradingNEWS