Gold prices have climbed to about $4,670 early Tuesday in Asia. This jump follows President Trump’s announcement of new tariffs on goods from eight European nations, driving up demand for safe-haven assets. The countries affected include Denmark, Norway, Sweden, France, Germany, the Netherlands, Finland, and the UK. The announcement has raised fears of a wider trade war, with the EU eyeing a €93 billion tariff package on U.S. imports.

Analyst Predictions On The US Federal Reserve

Analysts expect the U.S. Federal Reserve to pause its plans for monetary easing, as labor market conditions are stabilizing. The U.S. Dollar plays a crucial role in affecting Gold prices, which typically move in the opposite direction of the Dollar and U.S. Treasuries. Emerging economies like China and India are significant buyers of Gold. In 2022, they added 1,136 tonnes worth $70 billion to their reserves. Gold prices are influenced by interest rates and geopolitical tensions, as Gold does not yield any interest. Gold is a safeguard against inflation and currency devaluation, keeping its reputation as a safe-haven asset during economic uncertainty. Its negative correlation with risk assets and the Dollar makes it appealing in times of financial instability. As gold approaches $4,670, the increase is mainly due to the new tariffs on several European countries. This geopolitical uncertainty is driving a surge towards safe-haven assets. The situation may worsen, as the EU is discussing a €93 billion retaliation package, likely pushing prices higher. We’ve seen similar patterns during major trade disputes in 2025 and earlier years, where rising tensions led to more investments in gold. This trend suggests it’s a good time to consider long positions, anticipating further moves towards safe investment. Historical trends indicate gold rallies of 15-20% during past trade conflicts, reinforcing this strategy.

Risks To The Bullish Gold Sentiment

A key risk to this optimistic outlook is the Federal Reserve’s approach to interest rates. Currently, there’s little chance of a rate cut this month. Higher rates often strengthen the Dollar, which could pose challenges for non-yielding assets like gold, potentially limiting the rally. Given the uncertainty, buying call options on gold futures or gold ETFs may be a wise choice in the coming weeks. This strategy allows for potential gains from rising trade tensions while controlling maximum risk to the premium paid. Bull call spreads might also offer a cost-effective option to prepare for upward movements. Supporting this optimistic view are strong purchases from central banks, which provide a solid foundation for prices. In both 2023 and 2024, central banks added over 1,000 tonnes to their reserves, decreasing the available supply. This support is crucial and can cushion against price drops from hawkish Fed comments. We should keep an eye on the inverse relationship between gold and risk assets. A significant drop in equity markets, especially in the S&P 500, due to these tariffs could trigger another buying wave for gold. A spike in the VIX volatility index might serve as an early indicator for the next increase in gold prices. Create your live VT Markets account and start trading now.

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