Gold prices ended the trading week near $2,800 an ounce, approaching historical peaks set in late October 2024. Many analysts believe that gold is benefiting from global instability and rising concerns about inflation.
Before Mr. Trump took office, many economists and market experts warned that his policies could push inflation higher and pose risks to global growth.
On Wednesday, he spoke via video at the World Economic Forum in Davos, stressing his desire to lower global interest rates.
It is worth noting that his statements are inconsistent with the policy direction of the US Federal Reserve (FED). The FED has made it clear that they are in no hurry to cut interest rates. The reason is that the US economy is still strong and the job market is stable, although inflation is persistent.
However, gold is not only reacting to Mr. Trump's inflation comments but is also proving itself to be a safe-haven asset at this time.
Mr Trump appears ready to go head-to-head with Fed Chairman Jerome Powell, which, regardless of the outcome, could have unintended consequences for the US economy or people's livelihoods.
Not stopping at interest rates, Mr. Trump also continues to push for deeper tax cuts, which may help the economy grow in the short term but will also increase the government's already very high public debt.
This is also the reason why analysts say gold is becoming more and more attractive amid concerns about the US monetary system.
While Mr Trump has grabbed the headlines, he is not the only one advocating protectionist policies. In Davos, amid the upbeat speeches, the World Economic Forum warned that deglobalisation is becoming increasingly evident.
A report released at the start of the conference said the trend could cost the world up to $5.7 trillion – equivalent to 5% of global GDP – due to reduced trade, reduced cross-border investment and lost economic efficiency. In the event of a serious global divide, inflation could rise by more than 5%.
For now, the outlook for gold remains strong, although volatility is inevitable. Geopolitical and economic uncertainty is expected to continue to support the metal’s rally.
After a relatively quiet end to 2024, what we saw in January 2025 — especially this past week — has some analysts wondering if a $3,000 price target is still too conservative.
Time will tell, but Trump's first week in the White House has certainly given the gold market a strong boost.
Economic calendar affects gold prices this week
This week's economic calendar will focus on central banks around the globe, with the US Federal Reserve and Bank of Canada announcing interest rate decisions on Wednesday, followed by the European Central Bank on Thursday.
Markets will also be paying attention to a number of U.S. economic data, including December new home sales on Monday, durable goods and consumer confidence reports on Tuesday, fourth-quarter GDP, weekly jobless claims and pending home sales on Thursday, and PCE, personal income and personal spending on Friday morning.
