Gold's historic run: seven weeks of gains and record prices

Gold prices surged to yet another record high on Friday as a weaker dollar boosted sentiments in the market.

Investors remained cautious about US President Donald Trump’s plans for reciprocal tariffs.

The dollar weakened on Friday due to concerns about tariffs and mixed US inflation data.

“Concern continues to grow following Trump's announcement to impose reciprocal tariffs on countries taxing US imports,” Gary Wagner, technical market analyst at Kitco, said in a report.

At the time of writing, the April gold contract was at $2,957.69 an ounce, up 0.4% from the previous close.

The contract had hit a record high of $2,963.92 per ounce earlier in the session.

Dollar weakens on Trump’s actions

On Thursday, Trump revealed a plan to implement a system of reciprocal tariffs.

This system would impose matching tariffs on goods imported from any country that currently has tariffs on US exports.

The aim is to create a fairer trade environment for US businesses and encourage other countries to reconsider their tariff policies.

However, the implementation of these reciprocal tariffs will not be immediate.

Commerce and economics officials have been tasked with conducting a thorough study of the potential impacts of such tariffs on specific countries and industries.

This analysis is expected to take some time, and the implementation date for the reciprocal tariffs has been set for April 1.

Market sentiment got better due to the April deadline since it gives countries additional time to negotiate with Washington. These factors weighed on the dollar on Friday.

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

US inflation data

The US Bureau of Labor Statistics released data on Thursday showing that the Producer Price Index (PPI) rose by 3.5% year-over-year in January.

This increase surpassed the 3.3% rise observed in December and exceeded the market expectation of 3.2%.

The PPI measures the average change over time in the selling prices received by domestic producers for their output.

The annual core PPI, which excludes volatile food and energy prices, increased by 3.6% year-over-year in January.

This result was higher than the revised 3.7% figure from December and surpassed the market forecast of 3.3%.

The higher-than-expected PPI readings for January indicate that inflationary pressures persist in the US economy. This could lead the Federal Reserve to continue raising interest rates in an effort to curb inflation.

Higher interest rates weigh on gold as it is a non-yielding asset, unlike bonds.

However, the Fed's preferred inflation gauge, the personal consumption expenditure index, may see a downtrend as certain components of both producer and consumer inflation, which factor into the PCE price index, softened slightly in January.

This is despite both readings coming in higher than expected. A downtrend in PCE inflation could give the central bank more room to cut rates.

Seventh positive weekly gains for Gold

This week marks the seventh consecutive week that gold prices have risen.

“A remarkable technical pattern has emerged in gold's price action: seven consecutive weekly gains, represented by bullish (green) candlesticks beginning December 30,” Wagner said in the Kitco report.

This unusual event has only been seen once before in recent gold trading history, during the summer of 2011, according to the report.

However, Wagner believes that the similarities between these two seven-week bullish periods are noteworthy, as both occurred when gold prices reached all-time highs.

Wagner added:

“The issue at present is that there is no historical price action to look at and find areas of resistance where price could potentially pullback,” Zain Vawda, market analyst at OANDA, said.