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Gold rallies as investor’s sweet spot away from equities and the US Dollar

  • Gold sees investors flock in as fresh all-time hits at $2,877 on Wednesday.
  • Equities dive lower amid Asia reopening after Chinese New Year holidays.
  • Gold sese rally stretch further into af ive-day winning streak. 

Gold’s price (XAU/USD) rallies for a fifth consecutive day in a row on Wednesday, accounting for more than 2.5% of gains this week and hitting fresh all-time highs near $2,877 with investors piling into the precious metal commodity. Softer economic data from the United States (US), which further supports the case for another rate cut from the Federal Reserve (Fed), together with quickly fading tariff fears, is lifting Gold to higher levels day by day. 

On the economic data front, the calendar could become an additional tailwind for Gold to stretch even higher. This Wednesday, US Purchasing Managers Index (PMI) data for January will be released. A softer PMI print could be enough to set off Gold again to a new all-time high. 

Daily digest market movers: Hits where it hurts

  • Investors and traders are parking their cash under Gold, away from tech stocks, whilst being safe from the fresh lows in US yields as inflation concerns abate, Bloomberg reports.
  • At 14:45 GMT, S&P Global will release the January final reading for the Purchasing Managers Index. The ISM Services PMI is expected to stay stable at 52.8.
  • At 15:00 GMT, the Institute for Supply Management (ISM) will also release its PMI data for the Services sector as a whole:
    • The PMI is expected to tick up to 54.3 from 54.1 in December.
    • The Prices Paid component was at 64.4 last time and has no forecast.
  • The CME FedWatch tool shows an 83.5% chance of keeping interest rate unchanged in the March 19 meeting, compared to 16.5% for a 25 basis points rate cut. 

Technical Analysis: Sweet spot

Gold is on a tear again, and with China heading back into markets after the Chinese New Year holidays, expect to see a catch-up move in assets. With the Bullion rally heading into its fifth day on Wednesday, expect Chinese traders to try to catch up with it, meaning that any brief dip or pullback will be bought with interest. Since there are no reference levels that bear historic value anymore, the intraday Pivot Point levels are becoming increasingly important. 

The Pivot Point level for this Wednesday is the first nearby support at $2,831. From there, S1 support should come in at $2,818, though it does not look the best. Instead, look for S2 support at $2,793, which roughly coincides with$2,790 (the previous high of October 31, 2024) as a more significant level. 

On the other side, R2 resistance at $2,869 is the next level to watch, followed by the logic big figures such as $2,880 and $2,900. Further up, some analysts and strategists have already called for $3,000.

XAU/USD: Daily Chart

Tariffs FAQs

Tariffs are customs duties levied on certain merchandise imports or a category of products. Tariffs are designed to help local producers and manufacturers be more competitive in the market by providing a price advantage over similar goods that can be imported. Tariffs are widely used as tools of protectionism, along with trade barriers and import quotas.

Although tariffs and taxes both generate government revenue to fund public goods and services, they have several distinctions. Tariffs are prepaid at the port of entry, while taxes are paid at the time of purchase. Taxes are imposed on individual taxpayers and businesses, while tariffs are paid by importers.

There are two schools of thought among economists regarding the usage of tariffs. While some argue that tariffs are necessary to protect domestic industries and address trade imbalances, others see them as a harmful tool that could potentially drive prices higher over the long term and lead to a damaging trade war by encouraging tit-for-tat tariffs.

During the run-up to the presidential election in November 2024, Donald Trump made it clear that he intends to use tariffs to support the US economy and American producers. In 2024, Mexico, China and Canada accounted for 42% of total US imports. In this period, Mexico stood out as the top exporter with $466.6 billion, according to the US Census Bureau. Hence, Trump wants to focus on these three nations when imposing tariffs. He also plans to use the revenue generated through tariffs to lower personal income taxes.