CFD Markets Analysis: News and forecasts for 31 January 2025

21:23

Gold hovers near all-time highs as tariff confusion sparks market jitters

Gold sustains gains, trading at $2,797, as White House clarifies tariff timeline confusion.
Revised tariff announcements lead to brief dip in Gold with traders eyeing $2,800 resistance.
Despite steady December Core PCE data, geopolitical uncertainty keeps Gold prices elevated.

Gold price trades near all-time highs above $2,800 on Friday as market participants turn risk-averse after the White House corrected earlier reports from Reuters that the United States (US) would not impose tariffs on Canada and Mexico on February 1 and instead would do it on March 1. At the time of writing, XAU/USD trades at $2,797, up 0.15%.

US Press Secretary Karoline Leavitt emphasized that tariffs of 25% would be enacted on Canada and Mexico on February 1, Saturday, adding that previous reports were wrong. She also added that Washington would apply 10% duties on goods imported from China.

Following the report, the Greenback advanced, and Gold trimmed some of its earlier gains above $2,800. Bullion’s failure to print a daily close above the latter could pave the way for booking profits ahead of next week’s US Nonfarm Payrolls data.

An earlier report from Reuters revealed that the US was set to impose tariffs until March 1. The article pointed out that Trump will announce tariffs that will include a process for the countries to seek exemption on certain imports.December’s Core Personal Consumption Expenditures (PCE) Price Index, the Fed’s preferred inflation gauge, increased in December as expected, surpassing November’s number. However, on a yearly basis, Core PCE remained unchanged from the previous figures.

The data comes after soft Q4 GDP figures and the Federal Reserve’s latest monetary policy meeting. Meanwhile, Fed officials have begun making public remarks, with Governor Michelle Bowman and Chicago Fed President Austan Goolsbee weighing in on economic conditions.

Daily digest market movers: Gold price advances on US tariff headlines

Gold price edges up despite the rise of US Treasury yields. The US 10-year T-note yield rises six basis points to 4.571%. US real yields, as measured by the 10-year Treasury Inflation-Protected Securities (TIPS), followed suit, climbing seven basis points to 2.146%.
The US Core PCE rose by 2.8% YoY in December, in line with expectations, while monthly inflation increased by 0.2%, up from November’s 0.1%.
Fed Governor Michelle Bowman maintained a hawkish stance, boosting the US Dollar by emphasizing that inflation risks remain skewed to the upside. While she did not rule out rate cuts, she stressed they would be data-dependent and likely gradual.
Chicago Fed President Austan Goolsbee expressed confidence in the December inflation report, stating that inflation is progressing toward the 2% target.
Money market futures now price in 50 basis points of Fed rate cuts in 2025, with traders anticipating the first move in June.

XAU/USD technical outlook: Gold price bulls lurk near $2,800

Gold’s uptrend has regained momentum, surging to a record high of $2,817 hit earlier as bulls eye higher prices like the $2,850 milestone. A sustained rally could see buyers targeting the latter, followed by $2,900 and eventually the $3,000 mark.

Conversely, sellers must clear the January 27 swing low of $2,730, before the golden metal tumbles toward $2,700. If surpassed, the next stop would be the confluence of the 50 and 100-day Simple Moving Averages (SMAs) from $2,666 to $2,671.

On the downside, sellers would need to push XAU/USD below $2,750 to strengthen bearish prospects toward $2,700. A break below that level could open the door for further losses with key support at $2,663 where the 50-day and 100-day Simple Moving Averages (SMAs) converge.

Gold FAQs

Why do people invest in Gold?

Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.

Who buys the most Gold?

Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.

How is Gold correlated with other assets?

Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.

What does the price of Gold depend on?

The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.

21:16

US President Donald Trump: I will impose tariffs on the EU

United States (US) President Donald Trump spoke with reporters late on Friday, further amending statements made by his own White House personnel which were also meant to amend reports that the Trump administration may be kicking the tariff can down the road to March 1. President Trump's team reiterated that tariffs on Mexico, Canada, and China were all starting this weekend on February 1.

Donald Trump himself added further fuel to the trade war fire, noting that not only are 25% tariffs landing on Mexico and Canada, but China is also getting its own 10% tariff. President Trump then added the European Union to his list of grievances he intends to solve with import taxes levied against US consumers, but added a caveat that Canadian Crude Oil imports, which the US energy sector is heavily reliant on, will see a specific tariff level of only 10%.

President Trump's clarifying statements to select reporters rambled somewhat, adding Venezuela to the mix of countries that the US intends to "do something about". Trump also addressed his concepts of a plan for tariffs on the EU at multiple points, however specific details remain thin.

Key highlights

Trump: Nothing can be done by China, Mexico and Canada right now to forestall tariffs.

We have big deficits and tariffs are something we're doing.

We may increase tariffs.

We're not looking for concession.

Canada has treated us very unfairly.

We will eventually put tariffs on chips.

We will put tariffs on steel, aluminum, and copper.

We will put tariffs on steel and aluminum this month or next.

I want to bring pharmaceuticals back to America with tariffs.

We are going to take back the Panama Canal.

I'm bringing tomorrow’s tariffs down to 10% on Canadian oil.

We want to do something with Venezuela.

I will impose tariffs on the European union.

Absolutely will put tariffs on the EU.

Tariff costs are sometimes passed along to consumers.

Tariffs may cause short-term disruption.

I'm not concerned about market reactions to tariffs.

We'll be doing something very substantial on tariffs with European union.

21:09

Australian Dollar trades softly higher despite tariff concerns

AUD/USD hovers above 0.6200, defending mild bids amid US tariff concerns and weak Chinese data.
US PCE data showed no surprises, Fed remains cautious.
RBA dovish bets continue to pressure the pair.

The Australian Dollar clings to mild gains on Friday, trading around 0.6215 after briefly touching a two-week low. The pair remains under pressure as US President Donald Trump reaffirmed plans to impose tariffs on Chinese imports, dampening risk sentiment.

Meanwhile, speculation over a potential rate cut by the Reserve Bank of Australia (RBA) in February and ongoing economic struggles in China continue to weigh on the Aussie.

Daily digest market movers: Aussie struggles on US tariffs concerns

US confirms 25% tariffs on Canada and Mexico, 10% on China, effective February 1.
US Dollar retreats as weak economic data erases weekly gains, pushing the DXY lower from its peak near 108.00.
China’s PMI data disappoints with manufacturing contracting and services barely expanding, pressuring the Aussie.
Iron ore prices hit yearly highs, offering mild support to AUD despite concerns over China’s weak demand.
Markets consider that the RBA cutting rates in February is a done deal, which is also weakening the Aussie.
On the US data front, the Personal Consumption Expenditures (PCE) Price Index, the Federal Reserve's preferred inflation measure, rose by 0.3% MoM in December, following a 0.1% increase in November.
On an annual basis, the PCE inflation rate increased to 2.6% from the previous month's 2.4%. The core PCE, which excludes food and energy prices, remained steady at 2.8% YoY for the third consecutive month.
Markets are expecting no rate cut by the Fed in March.

Technical outlook: AUD/USD struggles for direction

AUD/USD remains confined within a narrow range, facing resistance near 0.6230 while holding support at 0.6200. The Relative Strength Index (RSI) stands at 42 in negative territory, reflecting a lack of clear directional momentum. Meanwhile, the Moving Average Convergence Divergence (MACD) histogram prints decreasing green bars, suggesting fading bullish strength.

Despite recent recovery attempts, the Aussie’s upside potential appears limited. A break below 0.6200 could trigger further losses, while a move above 0.6230 may offer short-term relief.

Australian Dollar FAQs

What key factors drive the Australian Dollar?

One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.

How do the decisions of the Reserve Bank of Australia impact the Australian Dollar?

The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.

How does the health of the Chinese Economy impact the Australian Dollar?

China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.

How does the price of Iron Ore impact the Australian Dollar?

Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.

How does the Trade Balance impact the Australian Dollar?

The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.