Gold prices surged by over 1% on Friday, nearing their all-time high, driven by a weakening dollar and comments from U.S. President Donald Trump on tariffs and interest rates. Spot gold climbed 0.58%, reaching $2,770.88 per ounce, just $19.29 away from its October peak of $2,790.17. The precious metal gained 2.51% over the week, marking its fourth consecutive weekly increase.
Dollar Weakness Pushes Gold Higher
The U.S. dollar experienced its worst weekly performance in over a year, dropping 1.77% as the dollar index fell to 107.465, down from a high of 110.17 earlier this month. The shift in sentiment towards the dollar turned bearish after Trump suggested that forthcoming tariffs might be smaller and less widespread than initially anticipated. This eased fears of a global trade war, shifting focus to inflationary concerns, which bolstered gold as a hedge against rising prices.
Trump’s call for lower interest rates at the World Economic Forum also contributed to the dollar’s decline. A weaker dollar makes gold more attractive to foreign buyers, further strengthening demand for the precious metal.
Tariff and Trade Uncertainty Support Gold
Trump’s rhetoric on trade, particularly a potential “friendlier” resolution with China, has caused traders to become more cautious about the extent of future tariffs. With expectations that announcements on tariffs targeting countries like Canada, Mexico, China, and the European Union will be made by February 1, market attention has shifted away from the Federal Reserve’s upcoming meeting. The consensus is that the Fed will likely keep rates unchanged, enhancing gold’s appeal in the current low-yield environment.
Gold as a Hedge Amid Inflation and Instability
Gold’s status as a key inflation hedge continues to attract demand in today’s uncertain economic landscape. As low-yield assets like gold gain favor during times of instability, investors remain positioned for potential central bank accommodation and elevated price levels. A short-covering rally has further fueled gold’s gains, although ETF flows remain mixed as traders assess short-term catalysts.
Gold Prices Set to Test Record Highs
With bullish momentum intact, gold may soon retest its all-time high of $2,790.17. The continued weakness of the dollar, combined with ongoing uncertainties surrounding tariffs and trade policies, presents a favorable backdrop for further price gains. Traders should closely monitor upcoming tariff announcements and changes in risk sentiment, which are expected to be the primary drivers of price action in the week ahead.
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