KEY POINTS:
- Gold reached new record highs following Trump's escalation over Greenland
- Main bullish trend remains supported amid geopolitical tensions and Fed's dovish reaction function
- Downside risks include Trump's de-escalation, US Supreme Court decision on tariffs and hot US data
FUNDAMENTAL OVERVIEW
Gold extended the gains into new all-time highs today as the recent Trump’s escalation over Greenland continues to be a tailwind for the precious metals.
As we’ve seen already last year, tariff threats have been boosting gold on higher stagflation risks. In fact, high tariffs generally lead to lower growth and higher inflation. Stagflation is the best environment for precious metals.
In the bigger picture gold remains supported amid the geopolitical tensions and the dovish Fed’s reaction function. In the short-term, we could get some corrections on easing tensions or hawkish repricing of interest rate expectations.
Possible catalysts for a correction include de-escalation over Greenland likely coming from Trump himself. Hawkish repricing of interest rate expectations on hot US data, with NFP in the spotlight next month. Lastly, a potential US Supreme Court ruling against Trump’s tariffs.
GOLD TECHNICAL ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can see that gold jumped into a new all-time high yesterday following Trump’s escalation over Greenland over the weekend. From a risk management perspective, the buyers will have a better risk to reward setup around the trendline to position for a rally into new all-time highs, but such a big pullback will likely require one of the above-mentioned catalysts.
GOLD TECHNICAL ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour chart, we can see that we have a minor upward trendline defining the bullish momentum on this timeframe. The price spiked into the trendline on Friday after Trump said that he might keep Hassett in his current position. The buyers stepped in around the trendline with a defined risk below it to target new highs.
If we get another pullback, we can expect the buyers to continue to lean on the trendline to keep pushing into new record highs, while the sellers will need a break lower to open the door for a bigger correction into the major trendline.
GOLD TECHNICAL ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour chart, we can see that the price was consolidating inside a channel before chopping up both buyers and sellers following Trump-induced spikes. From a risk management perspective, the buyers will have a better risk to reward setup around the top trendline of the channel to keep pushing into new highs. The sellers, on the other hand, will look for a break lower to target a deeper pullback into the major trendline. The red lines define the average daily range for today.
UPCOMING CATALYSTS
Today we have the weekly US ADP jobs data and the potential US Supreme Court decision on Trump’s tariffs. Tomorrow, we have Trump’s speech at the World Economic Forum in Davos. On Thursday, we get the latest US Jobless Claims figures. On Friday, we have the US Flash PMIs. Watch out for headlines and Trump’s posts on Truth Social regarding Greenland as the market’s focus remains on this latest escalation.
