Gold prices reach record levels, targeting $2,800/oz

Gold prices hit fresh record highs on Friday as the yellow metal notched up sharp gains on the back of a weak dollar. 

A weakened dollar makes commodities priced in the greenback cheaper for overseas buyers, thereby lifting demand. 

“This is yet another example of gold’s current resilience,” said David Morrison, senior market analyst at Trade Nation. 

“It found a base in mid-December after briefly breaking below $2,600. Since then, prices have pushed up steadily, and pullbacks have been short-lived and shallow.”

The market is likely to gain further as prices have breached the previous record high of $2,790 per ounce on Friday. 

Experts believe that the next resistance for gold prices could be $2,800 per ounce. 

At the time of writing, the February gold contract on COMEX was at $2,789.65 per ounce, up 0.9% from the previous close. 

Earlier in the session, the gold contract had hit a fresh record high of $2,792.61 per ounce. 

“A weaker US dollar provided a tailwind because, contrary to some fears, US President Trump has not yet imposed any tariffs but has so far only made threats,” Carsten Fritsch, commodity analyst at Commerzbank AG, said. 

Trump’s comments spark surge in gold prices

Recent remarks by US President Donald Trump have triggered a notable increase in the price of gold. 

Market analysts point to Trump's statements, which have heightened concerns around economic instability and geopolitical tensions, as the primary catalyst for this upward movement. 

Investors, seeking a safe haven amidst uncertainty, have flocked to gold, driving up demand and subsequently, its price.

This surge in gold prices underscores the enduring role of the precious metal as a hedge against economic and political turbulence. 

On Thursday, Trump said that he would push for an immediate reduction in interest rates. 

“This begins with confronting the economic chaos caused by the failed policies of the last administration,” Trump said.

Lower interest rates makes gold more appealing to investors as the yellow metal is an unyielding asset unlike bonds. 

Furthermore on Friday, Trump commented on his phone call with Chinese Prime Minister Xi Jinping that he does not want to impose tariffs on China and that a deal would be more constructive, Bloomberg reported. 

Difficult to gauge gold’s movement

There has been a slight increase in interest rate cut expectations.

This sentiment is reflected in the Fed Fund Futures, which are currently pricing in a high probability of an interest rate cut of 25 basis points by the summer. 

Furthermore, the market is now assigning a significant probability, around 70%, to the possibility of an additional interest rate cut by the end of the year. 

This suggests that investors are increasingly factoring in a scenario where the Federal Reserve adopts a more accommodative monetary policy stance in response to changing economic conditions.

“However, this cannot really explain the soaring gold price, as the US dollar is still trading at a high level and expectations of interest rate cuts are currently no stronger than at the start of the year,” Fritsch said. 

The considerable outflows totalling 15 tons from the world's largest gold ETF over the past three days also do not align with the overall situation.

“It is possible that the CFTC data this evening will provide a little more clues if they show an increase in speculative net long positions. However, this does not yet include the last two trading days,” Fritsch added. 

So what’s next?

Gold prices built on gains from this week and were rallying again on Friday due to Trump’s positive comments on China. 

“It looks like Trump is backtracking on earlier comments made during his campaign,” Filip Lagaart, editor at FXstreet, said in a report. 

“A tail risk could grow here, in case negotiations are not going the way Trump wants, he can still implement tariffs anyway.”

Gold prices breached the previous record highs of $2,790 per ounce on Friday, and were poised to reach new heights. 

The first line of resistance would be the crucial $2,800 per ounce barrier. 

“Meanwhile, some analysts and strategists have penciled in calls for $3,000, but $2,800 looks to be a good starting point as the next resistance on the upside,” Lagaart further said. 

Trade Nation’s Morrison said:

On the flip side, gold prices have strong support at $2,721 per ounce. 

Global brokerages have predicted that the yellow metal is likely to touch the $3,000 per ounce level this year. 

For now, traders would be interested to see if the rally could gather more steam and whether the market could conquer the next peak of $2,800.