- Gold price edges higher in Friday’s Asian session.
- Trade war fears and lower US bond yields support the precious metal.
- Investors brace for the US January Retail Sales data, which is due later on Friday.
Gold price (XAU/USD) resumes rally during the Asian trading hours on Friday. The growing concerns about US President Donald Trump’s tariff plans provide some support to the precious metal. Additionally, a decline in US bond yields across the curve contributes to the yellow metal’s upside.
However, the expectation that the US Federal Reserve (Fed) will stick to its hawkish stance and hold the interest rate higher for longer could drag the non-yielding yellow metal lower. Traders will keep an eye on the release of US Retail Sales for January, which is due later on Friday.
Gold price edges higher amid fears of a global trade war
- Trump unveiled a roadmap on Thursday for charging reciprocal tariffs against every country that imposes duties on US imports.
- However, commerce and economics officials need to study reciprocal tariffs against countries that place tariffs on US goods, and it will not be due until April 1.
- The US Producer Price Index (PPI) rose 3.5% YoY in January, followed by the 3.3% increase seen in December, according to the US Bureau of Labor Statistics on Thursday. This reading came in above the market expectation of 3.2%.
- The annual core PPI rose 3.6% YoY in January, compared to 3.7% (revised from 3.5%) prior, beating the estimation of 3.3%.
- The US Initial Jobless Claims for the week ending February 8 fell to 213K, compared to the previous week of 220K (revised from 219K), below the market consensus of 215K.
Gold price’s broader trend remains constructive, but overbought RSI warrants caution for bulls
Technically, the gold price maintains a strong uptrend on the daily timeframe as the price holds above the key 100-day Exponential Moving Average (EMA). However, the 14-day Relative Strength Index (RSI) remains in the overbought territory exceeding 70.0 and warrants some caution before positioning for any further gains.
The first upside barrier for the yellow metal emerges at the $2,942-$2,943 zone, representing the all-time peak touched on Tuesday. Extended gains could see a rally to $2,955, the upper boundary of the Bollinger Band. A decisive break above this level could pave the way to the $3,000 psychological level.
On the flip side, the initial support level is seen at $2,864, the low of February 12. Further south, the additional downside filter to watch is $2,744, the low of January 29. The crucial support level is located in the $2,680-2685 region, representing the lower limit of the Bollinger Band and the 100-day EMA.
Tariffs FAQs
Tariffs are customs duties levied on certain merchandise imports or a category of products. Tariffs are designed to help local producers and manufacturers be more competitive in the market by providing a price advantage over similar goods that can be imported. Tariffs are widely used as tools of protectionism, along with trade barriers and import quotas.
Although tariffs and taxes both generate government revenue to fund public goods and services, they have several distinctions. Tariffs are prepaid at the port of entry, while taxes are paid at the time of purchase. Taxes are imposed on individual taxpayers and businesses, while tariffs are paid by importers.
There are two schools of thought among economists regarding the usage of tariffs. While some argue that tariffs are necessary to protect domestic industries and address trade imbalances, others see them as a harmful tool that could potentially drive prices higher over the long term and lead to a damaging trade war by encouraging tit-for-tat tariffs.
During the run-up to the presidential election in November 2024, Donald Trump made it clear that he intends to use tariffs to support the US economy and American producers. In 2024, Mexico, China and Canada accounted for 42% of total US imports. In this period, Mexico stood out as the top exporter with $466.6 billion, according to the US Census Bureau. Hence, Trump wants to focus on these three nations when imposing tariffs. He also plans to use the revenue generated through tariffs to lower personal income taxes.
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