Gold sticks to intraday gains above $2,725, over two-month top amid trade war fears

• Gold price gains strong positive traction amid the flight to safety after Trump’s tariff remarks.
• Bets for more Fed rate cuts weigh on the US bond yields and further underpin the yellow metal. 
• A modest USD recovery, along with a positive risk tone, caps further gains for the commodity.

Gold price (XAU/USD) builds on the overnight bounce from the $2,689 area and gains some follow-through positive traction for the second straight day on Tuesday. US President Donald Trump’s tariff remarks boost demand for traditional safe-haven assets and lift the commodity to its highest level since November 6, around the $2,729 area. Apart from this, declining US Treasury bond yields, led by bets that the Federal Reserve (Fed) will cut interest rates twice this year, turns out to be another factor underpinning the lower-yielding yellow metal.

Meanwhile, expectations that Trump’s protectionist policies would reignite inflationary pressures and force the Fed to stick to its hawkish stance help the US Dollar (USD) to stage a modest bounce from a two-week low touched on Monday. This, along with a generally positive tone around the equity markets, contributes to keeping a lid on any further appreciation for the Gold price. Nevertheless, the fundamental backdrop seems tilted firmly in favor of bullish traders and suggests that the path of least resistance for the XAU/USD remains to the upside. 

Gold price retains positive bias amid trade war fears, Fed rate cut bets

• US President Donald Trump said this Tuesday that he intends 25% tariffs on Canada and Mexico, and the target date for tariffs would be as soon as early February. Trump further threatened that we could put tariffs on China if it doesn’t approve a TikTok deal, underpinning demand for the safe-haven Gold price. 
• The US Producer Price Index (PPI) and Consumer Price Index (CPI) released last week pointed to signs of abating inflation. This suggests that the Fed may not exclude the possibility of rate cuts by the end of this year and drags the yield on the benchmark 10-year US government bond to a nearly three-week low.
• The US Dollar (USD) regains positive traction following the overnight slump to a two-week low amid expectations that Trump’s protectionist policies could boost inflation and force the Federal Reserve to stick to its hawkish stance. This, in turn, might cap any further gains for the non-yielding yellow metal. 
• The Israel-Hamas ceasefire deal, along with hopes that Trump might relax curbs on Russia in exchange for a deal to end the Ukraine war, remains supportive of the positive risk tone. This might further hold back bulls from placing fresh bets around the XAU/USD in the absence of any relevant US economic data. 
• The market focus will remain glued to the crucial Bank of Japan policy meeting on January 23-24 on Friday. Apart from this, the release of the flash PMI prints, which will be looked upon for fresh insight into the global economic health, should infuse volatility around the commodity during the latter half of the week. 

Gold price acceptance above $2,720 hurdle favors bullish traders

From a technical perspective, the Gold price now seems to have found acceptance above the $2,720 supply zone. Moreover, oscillators on the daily chart have been gaining positive traction and are still away from being in the overbought territory. This, in turn, favors bullish traders and suggests that the path of least resistance for the XAU/USD is to the upside. Hence, some follow-through strength towards the next relevant hurdle near the $2,735 horizontal zone, en route to the $2,746-2,748 region, looks like a distinct possibility. The momentum could extend further towards challenging the all-time peak, around the $2,790 area touched in October 2024.

On the flip side, any corrective pullback now seems to find decent support near the $2,700 mark. A subsequent slide below the overnight swing low, around the $2,689 region, could prompt some technical selling and drag the Gold price further towards the $2,662-2,660 region. The latter should act as a pivotal point, below which the XAU/USD could fall to the $2,635 zone en route to the $2,622-2,618 confluence – comprising a short-term ascending trend-line extending from the November low and the 100-day Exponential Moving Average (EMA).