Gold Prices Rise Due to Tariff Worries

Gold prices jumped to nearly $4,700 per troy ounce, reaching a record high after President Trump threatened tariffs on eight European countries. As a result, the markets became cautious. The GBP/USD has recovered to 1.3400, rising a bit thanks to a weaker US dollar. This shift comes amid speculation about President Trump’s tariff announcements related to Greenland. Meme coins like Dogecoin, Shiba Inu, and Pepe fell around 3% on Monday. These cryptocurrencies are still below important moving averages and are working to stabilize. The market faced volatility this week, with stocks dropping, gold prices increasing, and the dollar showing mixed results. This week’s moves were not based on data but were shaped by geopolitical tensions.

Markets Respond to Geopolitical Issues

New US tariff threats over Greenland are weighing on European industries, just when optimism was starting to return after last year’s turbulence. We’ve seen this before during the 2018-2020 trade disputes, which caused the VIX volatility index to soar over 40% in a month due to tariff news. Increased uncertainty suggests we should brace for similar sharp moves in the weeks ahead. The EUR/USD pair is staying above the 1.1600 support level, but the rise in volatility is driving up option prices. One-month implied volatility for EUR/USD jumped from about 5% to over 8% during trade escalations in mid-2019. This indicates the growing cost of protecting against large price swings. For those anticipating stability, selling options could be a good strategy. Gold prices have hit a record high near $4,700 an ounce, serving as a key safe haven. This follows the trend from mid-2018 to mid-2020, when gold rose over 30% during the US-China trade war. Derivative traders may want to consider long call option strategies to take advantage of potential price increases while managing risk. The US dollar is weakening against traditional safe-haven currencies, with USD/CHF falling below 0.8000. This signals a risk-off environment, suggesting continued interest in the Swiss franc and Japanese yen if tensions rise. This dynamic indicates potential further declines in pairs like USD/CHF and USD/JPY. With US markets closed today for Martin Luther King Jr. Day, liquidity is low, which can amplify price movements. We should be cautious, as any news can lead to sharp, unpredictable swings on thin trading volume. This situation demands careful risk management and attention to possible price gaps when trading resumes. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now