Gold shines amid Safe-Haven demand

Former President Trump plans to impose tariffs on key trade partners, including the EU, Canada, and Mexico, from February 1

By Farah Mourad | 22 January 2025

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  • The EUR/USD pair slipped to 1.0415

  • Gold extended its climb above $2,750

  • Silver prices approached a key resistance level at $31.80

Recent comments from former President Donald Trump highlighted plans to impose significant tariffs on key trade partners, including the European Union (EU), Canada, and Mexico, set to take effect on February 1. Trump expressed concerns over trade imbalances, particularly with the EU, which he described as "problematic." The European Commission underscored the importance of safeguarding transatlantic economic ties, emphasizing that billions of euros in trade and investment are at stake.

Dollar Gains Ground

The EUR/USD pair edged lower on Wednesday, trading around 1.0415 during Asian hours. The Euro (EUR) faced renewed headwinds against the US Dollar (USD), largely driven by heightened geopolitical and trade uncertainties. Market participants are keenly awaiting European Central Bank (ECB) President Christine Lagarde's remarks later today, which could provide insight into the central bank's monetary policy direction amid a challenging economic landscape.

Adding to the Euro's downside, dovish expectations surrounding the ECB continue to weigh on the currency. Markets are pricing in potential rate cuts, with projections suggesting a reduction in the benchmark rate to 2% by year-end.

Commodities

Gold extended its rally for the third consecutive day on Wednesday, breaking above $2,750 during Asian trading hours to reach levels not seen since early November. The precious metal's upward momentum has been bolstered by safe-haven flows, driven by escalating trade tensions and market uncertainty following Trump’s tariff announcements.

The Federal Reserve's potential rate-cut trajectory and the rebound of bond market is another factor supporting gold prices.

Silver prices are approaching critical resistance at $31.80 in sight. Traders are watching this level closely as it could signal a breakout, driven by demand for safe-haven assets and industrial applications amid a mixed macroeconomic backdrop.

Oil

In the energy sector, recent US policy shifts under Trump have captured market attention. Plans to increase domestic extraction activities, including expanded drilling in Alaska and offshore areas, aim to bolster energy independence. The administration has also outlined intentions to replenish the Strategic Petroleum Reserve, which was significantly drawn down in recent years.

Additionally, the possibility of supply disruptions from Russia—whose exports predominantly go to China and India—could create volatility in global oil markets.

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