On Thursday, the Gold (XAU/USD) price gained 0.87% on continuing safe-haven flows as US President Donald Trump plans to impose reciprocal tariffs, heightening global trade concerns.
The US president has vowed to impose reciprocal tariffs on every country that charges duties on US imports, raising fears of a worldwide trade war. Gold tends to perform well when geopolitical tensions are on the rise. In addition, because tariffs will likely fuel inflation, investors buy gold as it offers some protection against rising consumer prices. Yesterday's report showed that January's US Producer Price Index (PPI) was slightly higher than expected, but it didn't strongly impact XAU/USD.
"The major factor is political uncertainty and the economic consequences, the PPI was pretty much neutral, and it didn't really have much of an effect on gold. Investors around the world are worried about what the Trump policies will do to the overall economy", said Jeffrey Christian, managing partner of CPM Group.
Overall, investors continue to buy safe-haven assets as they offer some protection amid growing trade tensions. Market participants flee towards gold despite high US interest rates for longer and improving prospects of a peace deal between Russia and Ukraine.
XAU/USD mainly was flat during the Asian and early European trading sessions. Today, traders should continue to pay close attention to any news about US tariff plans. Also, the US Retail Sales report at 1:30 p.m. UTC may trigger some volatility but is unlikely to change the underlying bullish trend in XAU/USD.
"Spot gold may break resistance at $2,939 per ounce and rise into the $2,971 to $2,983 range", said Reuters analyst Wang Tao.
The Euro Rallies as the US Delays Tariff Implementation
The euro (EUR/USD) gained 0.79% against the US dollar (USD) on Thursday as the greenback weakened after the White House said they won't immediately implement reciprocal tariffs.
New trade tariffs weren't coming into force on Thursday as many market participants had expected. Trump's trade and economic team continues to study bilateral trade relationships, so tariffs could be imposed within weeks. A delay may indicate that the Trump administration keeps the door open to possible negotiations and has been perceived positively by investors. In addition, minor details revealed yesterday in the Producer Price Index (PPI) report may have caused the US dollar's weakness. According to Reuters, key components that make up the final PPI number were relatively low, suggesting that the core Personal Consumption Expenditure (PCE) Price Index will likely be lower than expected when released later this month. The PCE is a favorite Federal Reserve inflation measure. After Thursday's PPI data, economists at Morgan Stanley revised their core PCE inflation expectation for January from 0.4% towards 0.3%.
Overall, the recent rally in EUR/USD is based on hopes that the US will delay tariff implementation and the latest US inflation figures will allow the Fed to deliver at least one rate cut this year. In other words, the EUR/USD rally doesn't reflect the eurozone's strength and should be treated with caution. The fundamental pressure on the euro is still bearish as the European Central Bank (ECB) is expected to pursue a looser monetary policy in 2025 than the Fed.
EUR/USD was falling during the Asian and early European trading sessions. Today, the main focus is on the US Retail Sales report at 1:30 p.m. UTC. Also, traders should consider any new developments and events regarding US trade tariff plans. Market volatility will likely remain elevated as political events, both domestic and international, create uncertainty.
Bitcoin Retreats, but the Bullish Long-Term Trend Remains Intact
Bitcoin (BTC) dropped by 1.25% on Thursday as it failed to break above the critical $98,000 resistance level confidently.
BTC/USD has been trading within a broad $92,500–$106,000 range for over three months without string fundamental impulses that could break the established sideways trend. Positive news on crypto regulation following Donald Trump's victory has already been priced in while rising geopolitical tensions exert downward pressure on BTC. Still, the overall environment for crypto remains bullish. According to a prediction from VanEck analyst Matthew Sigel posted on X, twenty US states are pushing for Bitcoin reserves.They could throw $23 billion into the crypto market if they pass. Massachusetts, Ohio, Texas, Illinois, Arizona, Iowa, Maryland, New Mexico, North Carolina, and Florida, among others, have already introduced Bitcoin reserve bills, and more are debating drafting theirs.
The proposed plans would funnel state money into reserve and pension plans, with investments ranging from $50 million to over $8.7 billion per state, depending on how much cash they're willing to commit. BTC/USD is probably undergoing what investors call the 'accumulation phase'. It may extend for a few more months before a possible upward break will take Bitcoin towards a new all-time high.
BTC/USD was relatively unchanged during the Asian and early European trading sessions. Traders should continue to pay close attention to any new developments regarding US tariff plans, as geopolitical developments also affect crypto. Additionally, the US Retail Sales report today at 1:30 p.m. UTC may trigger more volatility but is unlikely to change the underlying bullish trend in BTC/USD.