Gold prices surged during Friday’s trading session (January 24th), moving closer to the all-time high set last year. This rally was fueled by a weakening US dollar after President Donald Trump’s statement that he would demand “lower interest rates immediately.”
At the close of trading in New York, spot gold prices rose by $17.8/oz compared to the previous session’s close, equivalent to a 0.65% increase, settling at $2,771.6/oz. When converted using Vietcombank’s selling rate, this price equates to nearly VND 84.5 million/lượng, a VND 1.4 million/lượng increase from the previous week’s close.
With a 2.9% weekly gain, gold prices are inching closer to the record high of over $2,790/oz witnessed in late October 2024.
“One factor contributing to the rise in gold prices is the weakening US dollar. Additionally, both gold prices and exchange rates are being influenced by President Trump’s statements,” said Bart Melek, head of strategy at TD Securities.
According to Melek, Trump’s tariff policies could push inflation higher, creating an environment that favors gold as an inflation hedge. Moreover, Trump’s preference for lower interest rates benefits gold prices since gold is a non-interest-bearing asset. On Thursday, during his online address to world leaders attending the annual World Economic Forum (WEF) in Davos, Switzerland, Trump stated that he would “demand lower interest rates immediately.”
Although it is unclear what authority Trump will use to influence the Federal Reserve, which sets interest rates in the US, this statement caused both US Treasury bond yields and the US dollar exchange rate to dip on Friday, providing a boost to gold prices.
“Trump’s policies could push up prices in the US, and I believe the gold market is anticipating an increase in inflation while central bank policies may become more accommodative,” Melek told Reuters.
The yield on the 10-year US Treasury bond fell by 2 basis points to around 4.62% at Friday’s close. Earlier in the previous week, the yield on this bond had reached its highest level in over a year at 4.79%.
The US Dollar Index, which measures the strength of the US dollar against a basket of six major currencies, fell by more than 0.5%, ending the week below the 107.5 mark. This week, the index declined by over 1.7%. In the previous week, the index had reached nearly 110 points, its highest level in over two years, according to data from MarketWatch.
Next week, the Fed will hold its periodic monetary policy meeting on Tuesday and Wednesday. According to data from the FedWatch Tool of the CME trading floor, traders are betting on a 99% chance that the Fed will keep interest rates unchanged at this meeting. However, what is more crucial is the signal the Fed will send about the path of interest rates in the future.
A report by Standard Chartered Bank suggested that gold investors would pay more attention to how Trump will implement tariffs on February 1st, rather than the Fed’s meeting next week. After taking office on Monday this week, Trump announced that he would impose tariffs on goods from China, Canada, and Mexico, starting next month.
Despite gold’s significant gains during Trump’s first week in office, some analysts have warned about the risks to gold prices posed by the new president’s policies. Lukman Otunuga, an analyst at FXTM, stated that persistent high inflation could lead the Fed to maintain higher interest rates for longer.
“The inflationary concerns stemming from tariffs could limit gold’s upside potential, especially if it causes the Fed to slow down the pace of rate cuts. However, from a technical perspective, the trend for gold is bullish, with the next psychological level at $2,800/oz. In the coming week, the Fed’s decision could shape gold’s outlook for the following weeks,” Otunuga told Kitco News.
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