Gold (XAU/USD) opened the week with a significant bullish gap, propelling prices deeper into uncharted territory as safe-haven demand intensified. The surge follows threats from US President Donald Trump to impose tariffs on several European Union nations in a dispute over control of Greenland, reviving trade war anxieties and injecting fresh geopolitical risk into already fragile market sentiment.
At the time of writing, XAU/USD is consolidating around $4,663, just below its fresh all-time high near $4,690, representing a daily gain of nearly 1.75%. Trump’s renewed aggressive trade rhetoric has rattled investors and drawn sharp criticism from European officials, undermining confidence in US assets and weighing on the US Dollar (USD).
A weaker greenback is providing an additional tailwind for gold, even as traders scale back expectations for imminent Federal Reserve interest rate cuts.
Looking ahead, US markets are closed on Monday for the Martin Luther King Jr. holiday. Attention will shift later in the week to a batch of delayed US economic data due Thursday, including Personal Consumption Expenditures (PCE) inflation reports and the Q3 Gross Domestic Product (GDP) release. On Friday, focus turns to preliminary S&P Global Purchasing Managers Index (PMI) surveys and University of Michigan consumer sentiment data.
Market Movers: Trade Hostilities Flare Alongside Fed Leadership Uncertainty
Over the weekend, President Trump announced via Truth Social that a 10% tariff would be implemented from February 1 on eight European nations—including Denmark, Germany, France, the UK, Sweden, Norway, the Netherlands, and Finland. He added that the rate would climb to 25% in June unless “a deal is reached for the complete and total purchase of Greenland.”
In response, European Commission President Ursula von der Leyen and European Council President António Costa issued a joint statement warning that tariffs would “undermine transatlantic relations and risk a dangerous downward spiral.” French President Emmanuel Macron has urged the bloc to activate the EU’s “anti-coercion instrument.” European leaders are scheduled to hold an emergency meeting this week to discuss potential countermeasures, with EU ambassadors considering activating €93 billion in retaliatory tariffs prepared in response to Trump’s trade measures last year.
This new tariff threat emerges as the US Supreme Court is expected to rule soon on the legality of President Trump’s use of emergency tariff powers. The court is also set to hear arguments Wednesday in a separate case linked to Trump’s attempt to remove Fed Governor Lisa Cook over mortgage-fraud allegations.
Markets are also closely monitoring developments regarding the Federal Reserve leadership change, with President Trump expected to announce his decision this week. Trump indicated on Friday that he may retain National Economic Council Director Kevin Hassett in his current role rather than nominating him as Fed Chair. These comments have boosted speculation that former Fed Governor Kevin Warsh could emerge as the leading candidate.
On the monetary policy front, recent US economic data has reinforced the view that the Fed is likely to adhere to a gradual easing path rather than aggressive rate cuts. Markets are almost fully pricing in no change at the upcoming January meeting and broadly expect the central bank to remain on hold through the first quarter. According to the CME FedWatch Tool, June is currently viewed as the most likely timing for the first rate cut of the year, with probabilities hovering around 45%.
Technical analysis: Uptrend intact above key support levels (Note: No content was provided for this section in the original text to rephrase.)
From a technical standpoint, the XAU/USD rally continues unabated. The metal is trading comfortably above its key moving averages on both the hourly and daily timeframes, signaling strong upward momentum. This bullish trend remains intact, even as the daily Relative Strength Index (RSI) persists in overbought territory.
On the 4-hour chart, the recent bullish gap propelled XAU/USD out of its consolidation phase. The former resistance level near $4,650 has flipped to become immediate support, followed by the 21-period Simple Moving Average (SMA) around $4,566.
A sustained break below the $4,550 level would shift the near-term focus toward the psychologically significant $4,500 mark, which aligns closely with the 50-period SMA at $4,491.
Momentum indicators further support the bullish bias. The Moving Average Convergence Divergence (MACD) histogram has crossed into positive territory and is expanding, with the MACD line crossing above the signal line, indicating strengthening upside momentum. Additionally, the RSI is currently near 62 and turning higher after a brief dip below the 50 midpoint, suggesting that the broader bullish trend remains firmly in place.
