Gold is on the cusp of three-month highs at the backdrop of US President Donald Trump pushing for lower interest rates and protective trade policies rattling the markets. Additionally, the precious metal’s upward momentum has significantly boosted the US dollar, weakening across the board.
Gold Rally Catalysts
The US dollar has dropped to a month low in the aftermath of Trump’s speech at the World Economic Forum, where he urged global central banks to consider lower interest rates. Weakness in the greenback is one of the factors steering gold to highs of $2,776 an ounce, awaiting the $3,000 psychological level.
January 28–29 is when the US Federal Reserve will meet. The CME Group’s FedWatch Tool indicates that traders believe there is a 96% chance the Fed will maintain interest rates at their current level.
In addition to gold prices receiving a boost from calls for lower interest rates, the metal also continues to attract safe haven inflows. The threat of the US hitting other countries, including Mexico and Canada, with 25% trade tariffs has also left the market unsettled. President Trump has not provided specific details about the universal tariffs, leaving investors on edge.
During Trump’s first tenure in 2017, the Yellow Metal rallied 13%, marking its best annual gain in seven years. The rally once again affirmed how the precious metal is usually the go-to asset during economic and geopolitical uncertainty. Nevertheless, unlike in the past, tariffs in the current environment are likely to spark inflation, which could force central banks to hike interest rates.
Gold prices are negatively correlated to interest rates. That’s because higher interest rates result in a weaker US dollar and, in most cases, force investors to turn their attention to yielding assets such as bonds and treasuries at the expense of non-yielding assets like gold.
Bullish Bitcoin
Meanwhile, Bitcoin was again on the cusp of all-time highs above the 106,000 a coin level. The cryptocurrency has been edging higher ever since Trump won the election last year and hit a new high above $106,200 after Trump was inaugurated on January 20. The recent rally is fueled by reports that the US Securities and Exchange Commission is working on developing a comprehensive and transparent regulatory framework for crypto assets.
Cryptocurrency investors have heralded Trump’s inauguration as a turning point for the sector. The president has pledged to enact laws that will encourage cryptocurrency, such as a federal bitcoin hoard and a flexible regulatory framework.
The CEO of Finance expects the cryptocurrency market to reach a new all-time high in 2025 due to favourable regulatory changes in the United States. Richard Teng, who succeeded former Binance CEO Changpeng Zhao last year, expects the Trump administration to bring about “much clearer regulation” in the United States this year, which will benefit the cryptocurrency markets.
The remarks come on Morgan Stanley CEO Ted Pick reiterating that the bank is working with US regulators to examine how to deepen its involvement in cryptocurrency.
