Gold Gains as Traders Mull Fed Rate Cut Path, Trump Tariff Risks
Gold advanced as traders mulled the prospects of further monetary easing this year and potential risks to global trade from Donald Trump’s second term in the White House.
The latest data showed US private-sector hiring and wage growth slowed in December, pointing to a gradual softening of the labor market. This will be considered by Federal Reserve officials in deciding on where interest rates may go.
Policymakers have reaffirmed the view that the US central bank wants to take a cautious approach in lowering borrowing costs this year as they want to see more progress on easing inflation. Federal Reserve Governor Christopher Waller said Wednesday he believes inflation will continue to cool toward the central bank’s 2% target, prompting his support for additional interest-rate cuts this year. Lower rates typically benefit bullion as it doesn’t pay interest.
Gold traders are also assessing comments from Trump for clues on his tariff policy. In the space of an hour on Tuesday, he called for the US to absorb Canada, and take control of the Panama Canal and Greenland. He didn’t explain how he would fulfill those pledges, beyond threatening to impose tariffs on nations that didn’t cooperate.
CNN reported Wednesday that Trump is weighing declaring a national economic emergency to provide legal ground for universal tariffs, citing people familiar with the matter.
“It feels as though gold will be a solid hedge not just on the upcoming Trump tariffs,” but also againstretaliation measures from other nations, Pepperstone Group Ltd. head of research Chris Weston said in a note. Those measures are yet to be priced in by the market, meaning “cross-asset volatility could spike” and support bullion, he added.
Bullion surged 27% last year in a record-breaking run that was propelled in part by US monetary easing, though the rally lost momentum after Trump’s US election victory buoyed the dollar. Bulls are now facing the prospect of less impressive gains this year, with Goldman Sachs Group Inc. this week pushing back a target for gold hitting $3,000 an ounce to mid-2026 on expectations for fewer Fed cuts.
Spot gold was up 0.7% at $2,666.15 an ounce as of 11:04 a.m. in New York. The Bloomberg Dollar Spot Index climbed 0.5%. Silver and platinum advanced, while palladium dropped.
Source : Bloomberg
