Gold prices hit 11-week high as Trump’s trade policies and soft dollar drive demand

Gold prices surged to an 11-week peak on January 22, 2025, as safe-haven demand gained momentum amid uncertainty over U.S. President Donald Trump’s aggressive trade policies. A softer dollar further bolstered the metal’s appeal, pushing spot gold to $2,751.89 per ounce, up 0.3 per cent by 0502 GMT. Earlier in the session, gold hit its highest level since November 1, 2024, closing in on its record peak of $2,790.15 touched in October 2024.

On the Multi Commodity Exchange (MCX), gold futures for February 2025 delivery stood at Rs 79,478 per 10 grams, up 0.32 per cent at 12:30 PM IST, while silver futures for February 2025 were at Rs 92,223 per kilogram, up 0.17 per cent.

Driving factors: Uncertainty and a weaker dollar

Kelvin Wong, a senior market analyst at OANDA, attributed the bullish tone in gold prices to uncertainty surrounding the timeline and execution of Trump’s proposed trade tariffs. The President’s threats to impose a ten per cent tariff on European Union goods and a new tariff on Chinese imports starting February 1 have raised concerns about potential geopolitical and economic instability.

The dollar’s retreat has also supported gold’s rally. A weaker greenback makes the metal more affordable for holders of other currencies, amplifying its demand as a safe investment during volatile times.

Interest rate outlook and inflation concerns

Despite gold’s current momentum, analysts caution that its role as an inflation hedge could face challenges if Trump’s policies, seen as inflationary, prompt the U.S. Federal Reserve to maintain higher interest rates for an extended period. The Fed is scheduled to meet next week and is widely expected to hold rates steady, considering the uncertainty in trade and macroeconomic dynamics.

Market sentiment remains positive

Central bank purchases have created a robust demand base for the metal, which is further supported by macroeconomic uncertainty.

In other precious metals, spot silver edged up 0.1 per cent to $30.91 per ounce, palladium climbed 0.6 per cent to $963.59, and platinum rose 0.6 per cent to $948.94.

Gold’s upward trajectory underscores its enduring appeal as a safe-haven asset amid growing economic and geopolitical uncertainties.