Gold’s price shot up to yet another record, nearing $2,870 this Wednesday. Meanwhile, as Asian markets reopened post-Chinese New Year festivities, stock markets took a breather. Adding to its momentum, gold has now enjoyed a five-day winning stretch.
This week, gold (XAU/USD) has been on an impressive run, gaining more than 2.5% as it continues its upward climb, reaching new peaks around $2,877. Driving this surge is lackluster economic data from the U.S. that fuels the expectation for another rate cut by the Federal Reserve. Coupled with easing concerns over tariffs, these factors are propelling gold to unprecedented levels.
Turning to economic indicators, upcoming data could further bolster gold’s momentum. On Wednesday, the U.S. will release its Purchasing Managers Index (PMI) for January. Should the PMI soften, it’s likely to push gold towards another record-breaking high.
Market Movers: Gold’s Unstoppable Ascent
Traders seem to be finding refuge in gold, moving away from technology stocks amid declining U.S. yields and lessening inflation worries, according to Bloomberg. At 14:45 GMT, the January final PMI reading from S&P Global will be made public. Expectations are that the ISM Services PMI will remain steady at 52.8. Additionally, at 15:00 GMT, the Institute for Supply Management will release its data for the services sector:
- The PMI is anticipated to nudge up slightly to 54.3 from December’s 54.1.
- No forecast is provided for the Prices Paid component, which previously stood at 64.4.
As per the CME FedWatch tool, there’s an 83.5% likelihood that interest rates will be kept unchanged at the March 19 meeting, with only a 16.5% possibility of a 25 basis point cut.
Technical Analysis: Gold’s Relentless Rise
With China rejoining the fray after the holiday break, we might witness a compensatory surge in assets. As gold’s five-day rally advances this Wednesday, Chinese traders might look to capitalize on it, indicating that any minor dip will likely be met with enthusiastic buying. Traditional reference points have lost their historical relevance, making intraday Pivot Point levels crucial.
For this Wednesday, the Pivot Point stands at $2,831, marking the nearest area of support. If it drops further, S1 support is around $2,818, albeit less robust. S2 support, more significant, is $2,793, roughly aligning with the $2,790 mark from October 31, 2024.
On the upside, R2 resistance can be observed at $2,869, followed by key psychological levels like $2,880 and $2,900. Some experts are already speculating a stride towards $3,000.
XAU/USD: Daily Chart
US-China Trade War FAQs
A trade war typically unfolds between nations engaging in protectionist policies. This economic tug-of-war leads to tariffs and retaliatory measures, which ultimately hike import costs and can affect the standard of living.
The economic spat between the U.S. and China began in 2018 when then-President Donald Trump imposed trade barriers on China over alleged unfair trade practices and intellectual property theft. China retaliated with tariffs on U.S. products, including cars and soybeans. The tensions culminated in the signing of the US-China Phase One trade deal in January 2020, introducing required reforms to China’s trade practices to stabilize bilateral relations. However, the pandemic soon overshadowed this conflict. Notably, President Joe Biden, who followed Trump, maintained some tariffs and introduced additional levies.
With Donald Trump back in the White House as the 47th President, US-China tensions seem poised to resurface. True to campaign promises, Trump re-imposed 60% tariffs on Chinese goods upon his return to office on January 20, 2025. This renewal of hostilities threatens to disrupt global supply chains once more, suppressing investment and consumer spending while potentially stoking inflation.
