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Asset Watch
Tuesday, 04 February 2025
As promised, President Trump imposed a 25% tariff on goods from Canada and Mexico and a 10% tariff on imports from China, sparking a trade war. In response, these countries threatened retaliatory tariffs on American goods. Higher tariffs typically increase product costs, which can deter American consumers from purchasing them or prompt them to seek alternatives. This could slow economic growth in the affected countries, disrupt supply chains, and drive inflation higher in the U.S. As a result, the Federal Reserve’s ability to cut interest rates may be limited. Consequently, the U.S. dollar strengthened, leading to a decline in the prices of certain commodities, including gold.
Gold prices initially declined but recovered losses after President Trump announced a one-month suspension of tariffs on Mexico. This decision came after securing commitments from the Mexican side to deploy troops along the U.S. border to curb fentanyl smuggling and illegal immigration. The move suggests that Trump’s tariffs serve as a negotiation tool, pressuring trade partners to cooperate in exchange for their removal or suspension.
Gold recently surpassed its October 31 high, reinforcing strong bullish momentum. Currently trading within the 2,791– 2,900 zone, prices seem on to be trading towards the high end of this zone. However, the resistance at the psychological level of $2,850 should be considered.
In mid-January, gold’s price uptrend gained momentum as new traders entered the market, steepening its trajectory. This formed a bullish trendline from the January 6 low. A break below this trendline could signal weakening bullish momentum. A daily close below $2,791 may trigger a further decline toward $2,774 .
Chart Source: ADSS Platform
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