Iran rejects U.S. war proposal, says no talks before conditions met
Risk aversion continued at the start of another week following Donald Trump’s pledge of blanket tariffs of 25% on steel and aluminum imports to the US. The markets opened with gaps as a result while safe haven flows continued to gain traction in the face of uncertainty.
Latest Tariff Pledges
President Donald Trump is expected to sign an order on tariffs later on Monday or Tuesday, a source said. This move could raise the chances of a trade war involving multiple countries.
Trump announced on Sunday that he will add a 25% tariff on all steel and aluminum imports to the U.S., in addition to existing duties. He also plans to introduce more tariffs later this week to match the tariffs other countries place on U.S. goods. Trade partners have warned they might retaliate. Details of the order Trump will sign are not yet available.
Source: LSEG
During his first term starting in 2017, Trump set tariffs of 25% on steel and 10% on aluminum. However, he later gave exemptions to some countries like Canada, Mexico, and Australia. He also made deals with Brazil, South Korea, and Argentina to allow certain amounts of steel and aluminum without tariffs, based on their trade levels before the tariffs. Later, President Biden made similar duty-free agreements with Britain, Japan, and the EU.
Gold Council Report and ETF Flows
Gold enjoyed a stellar start to 2025 with January seeing the precious metal return gains of around 6.6%. This has continued in the early part of February with safe haven flows remaining strong and keeping Gold prices supported.
The World Gold Council report for January provided some interesting insights into the rise of Gold prices. A lot of which we have discussed but I thought it was worth a look.
The World Gold Councils Gold Return Attribution Model (GRAM) shows that most factors had a positive effect, including a big increase in the Geopolitical Risk Index (GPR). However, the strong US dollar in December held back returns slightly due to its delayed impact.
Source: Bloomberg, World Gold Council
On the ETF front, 2025 kicked off with positive flows, led by Europe, while North America saw outflows. Following the second consecutive monthly inflow and supported by a higher gold price, global gold ETFs’ total AUM rose to US$294bn and holdings bounced to 3,523t.
European ETF flows reached their highest level in years with inflows of +US$3.4bn, 39t which was likely supported by the European Central Bank (ECB) rate cut, causing bund yields to drop sharply throughout the month.
These developments look set to continue and thus why many are now pricing and upgrading their Gold forecasts for 2025. $3000/oz now seems within reach, with the question being when will it be reached?
US CPI Data This Week
On the data front, US inflation is the biggest data event this week which could have an impact on Gold prices. However, despite last week’s uptick in inflation expectations as revealed by the Michigan Sentiment Index, I think it may be too soon for a significant change in inflation.
I do not expect a significant uptick or shot yet, as it will require more time before the impacts of tariffs are fully felt and absorbed by the US economy.
If there is a significant uptick in inflation this could send Gold prices lower. Market participants will be concerned about an uptick in inflation before the impact of tariffs has been felt and this could spook markets.
This could work both ways though as a rise in inflation could spook markets and also lead to increased demand for safe havens. This could then net-off and keep Gold prices elevated.
Technical Analysis – Gold (XAU/USD)
From a technical analysis standpoint, this analysis is a follow up from the technicals last week.
Gold prices have continued their advance and breached above the $2900/oz handle. The issue at present is that there is no historical price action to look at and find areas of resistance where price could potentially pullback.
As i mentioned in last weeks piece, pullback may prove short-lived at this stage with round numbers potentially key at this stage.
Source: TradingView (click to enlarge)
Looking at the four-hour chart below and Gold remains around overbought territory with immediate support resting at 2886 which was the Friday high.
A pullback here may provide potential bulls an opportunity to join the trend. A break of this level opening up a retest of the 2870 support before the 2850 handle comes into focus.
As mentioned, the upside does not have a lot to look at except today’s high at 2911 which could serve as resistance. A break of this level will bring focus to 2925, 2950 and 2975 as potential areas where price may experience a pullback.
Source: TradingView (click to enlarge)
Support
- 2900
- 2886
- 2770
Resistance
- 2911
- 2925
- 2950
