Gold Rises Due to Approaching Deadline for Trade Tariffs Decision
The gold ( XAU/USD ) price increased by more than 1% and reached a new all-time high on Thursday as safe-haven demand increased due to US trade tariff threats.
"We are seeing keener uncertainty and anxiety about the Trump administration's new policies on trade and foreign policy fresh technical buying coming in as prices are trending higher now in both gold and silver", said Jim Wyckoff, a senior market analyst at Kitco Metals.
Shortly after taking office, US President Donald Trump threatened to impose 25% import tariffs on Canada and Mexico and a 10% duty on Chinese goods on 1 February. The deadline is tomorrow, and White House spokeswoman Karoline Leavitt recently confirmed that the president still plans to go ahead with the tariffs. Together, these three countries account for over $2.1 trillion in annual US imports and exports, so tariffs can seriously destabilise global trade and fuel more inflation.
Gold tends to rally during economic uncertainty, inflationary pressures, or when traditional financial markets experience significant volatility. Investors seek a safe haven asset that historically retains its value over time, fleeing to gold.
"Gold is shining as a safe haven asset, with investors seeking shelter to weather the storm of unpredictability", said Susannah Streeter, a head of money and markets at Hargreaves Lansdown.
XAU/USD was relatively flat during the Asian and early European trading sessions. Today, the main focus is on the US macroeconomic statistics. The US Personal Consumption Expenditure (PCE) Price Index report will come out at 1:30 p.m. UTC. The market expects a 0.2% monthly rise in core PCE Price Index and a 2.8% annual increase. If the figures come out higher than expected, XAU/USD may drop slightly. With lower-than-expected numbers, XAU/USD will probably rally sharply. Key levels to watch are support at $2,784 and resistance at $2,810.
Dovish ECB Monetary Policy Pressures Euro
The euro ( EUR/USD ) lost 0.29% against the US dollar (USD) during a very volatile trading session on Thursday as the European Central Bank (ECB) cut interest rates and kept the door open to further policy easing.
As expected, the ECB lowered its base interest rates by 25 basis points (bps) yesterday and signaled that more cuts are likely. An accompanying statement revealed that policymakers were increasingly concerned about the region's sluggish economic performance and the risk of a potential recession, even if inflationary pressures remain. The ECB's shift in focus indicates a delicate balancing act, attempting to stimulate economic activity without completely abandoning its mandate to maintain price stability.
Meanwhile, the eurozone's Gross Domestic Product (GDP) growth rate was unchanged in Q4, falling short of expectations of a 0.1% expansion as two straight years of contraction in Germany's GDP weighed on the whole bloc. With the economy stagnating due to an industrial recession and weak consumption, the ECB is seen sticking to its easing path even after the US Federal Reserve (Fed) recently kept its rate unchanged and hinted at a pause in the rate-cutting cycle. Thus, the fundamental pressure on EUR/USD remains bearish, especially in light of US trade tariff threats.
EUR/USD was falling during the Asian and early European trading sessions. Today, the main focus is on German and US macroeconomic statistics. Germany will publish its Consumer Price Index (CPI) report at around 1:00 p.m. UTC, while the US Personal Consumption Expenditure (PCE) report will come out at 1:30 p.m. UTC. Both reports may influence interest rate expectations and investors' sentiment, likely provoking sharp price movements in EUR/USD. The market expects a 0.2% rise in monthly core US PCE and a 2.8% annual increase. If the figures come out higher than expected, EUR/USD may drop slightly. Otherwise, EUR/USD will probably rally sharply. Key levels to watch are support at 1.03610 and resistance at 1.04100.
Bitcoin Increases Fuelled by Rising Institutional Interest
Bitcoin ( BTC/USD ) price rose 0.96% on Thursday as the European Central Bank (ECB) cut borrowing costs, while US trade tariff threats fueled investors' interest in alternative assets.
A less restrictive or looser monetary policy typically leads to increased liquidity in financial markets and a decline in the value of fiat currencies, creating a favorable environment for Bitcoin. Therefore, yesterday's ECB decision made Bitcoin a bit more attractive to investors seeking higher returns. However, ECB President Christine Lagarde stated that the central bank won't consider including Bitcoin in its reserves. Lagarde reiterated the bank's dedication to ensuring its reserves' stability and security while expressing reservations about Bitcoin's inherent volatility and security risks. She emphasized that these characteristics make Bitcoin unsuitable for the bank's reserve management strategy, prioritizing reliability and predictability in safeguarding value.
Meanwhile, other eurozone countries take a different approach. The Czech National Bank has greenlit a plan to explore diversifying its reserves by considering new investment assets, including Bitcoin. Norges Bank Investment Management—the world's largest sovereign wealth fund—made significant investments in companies associated with Bitcoin. Meanwhile, The US Securities and Exchange Commission has taken the first step towards approving Bitwise Asset Management's proposed exchange-traded fund (ETF) that would track price movements of Bitcoin and Ethereum . The decision might attract additional capital from retail investors into the crypto sphere.
BTC/USD was relatively flat during the Asian and early European trading sessions. Today, the US Bureau of Economic Analysis will publish its Personal Consumption Expenditure (PCE) Price Index report at 1:30 p.m. UTC. The market expects a 0.2% rise in monthly core PCE and a 2.8% annual increase. If the figures are higher than expected, BTC/USD may drop slightly. Lower-than-expected numbers may cause a rally in BTC/USD. However, given that Bitcoin is already trading near an all-time high, a strong rally is relatively less likely. Key levels to watch are resistance at $106,400 and support at $104,000.