Gold Is Ready to Update Its All-Time High

Gold prices have risen by 1.9% this week to $2,753 per troy ounce, approaching the all-time high of $2,789. A further upward move could easily push prices beyond this peak in the coming days. The current rally began on Monday, and even if momentum slows, gold could still reach new record levels through inertia, possibly at the start of next week.

A breakout above the record high would likely fuel further gains, with prices potentially targeting $3,000 per ounce. Although fundamental drivers are becoming less transparent, technical indicators strongly support continued upward momentum. The diamond pattern on the charts points to a trajectory towards $3,100–$3,200 per ounce by mid-April. While large investors appear cautious, they are still buying gold, with the SPDR Gold Trust (GLD) reporting net inflows of $211.0 million last week, reinforcing the bullish outlook suggested by the diamond pattern.

From a technical perspective, the targets are well-defined, but fundamental factors present a mixed picture. On one hand, easing concerns about imminent tariff hikes promised by Donald Trump and positive discussions with China's President Xi Jinping suggest a reduced likelihood of a trade war, which would typically weigh on gold prices. On the other hand, the retreat of inflationary pressures has created favourable market conditions, supporting gold's ascent. U.S. 10-year Treasury yields have fallen from 4.80% to 4.59%, while the probability of a quarter-point interest rate cut by the Federal Reserve in March has increased to 30.0% from 19.8%. These factors suggest that gold is likely to continue rising under almost any scenario.

The escalating threat of tariffs is another factor pushing gold higher, contributing a 0.50% gain last week and 1.9% this week. On Tuesday, a day after his inauguration, Trump reaffirmed his plans to impose tariffs ranging from 10% to 25% on imports from Canada, Mexico, China, and the European Union, starting 1 February. If implemented, these tariffs could prompt China to increase its gold reserves, further accelerating the metal's upward trajectory. Conversely, if the tariffs are delayed or watered down, gold is still expected to climb, albeit at a slower pace, driven by expectations of looser monetary policy from the Fed. This creates a precarious scenario for traders, akin to navigating a "knife-edge" market.

Looking ahead, Trump is set to speak at the World Economic Forum on Thursday, where bold statements are anticipated. Additionally, the Bank of Japan is widely expected to raise interest rates by 25 basis points to 0.50% on Friday. The last time the BoJ increased rates, by 10 basis points, it caused significant market turmoil over two days and pushed the EURUSD up by 2.0%. A similar reaction this time could be enough to propel gold to new all-time highs.