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The week begins with the market in the midst of 7 week rally, which makes it vulnerable to a potentially bearish closing price reversal top.
Last week, XAU/USD settled at $2882.48, up $21.23 or +0.74%.
Trade War Concerns Continue to Underpin Gold Demand
Gold’s strength this week has been fueled by growing trade tensions after U.S. President Donald Trump signed an executive order targeting foreign nations’ trade policies. The plan introduces reciprocal tariffs on countries imposing taxes on U.S. imports, raising fears of a prolonged trade standoff.
Although Trump held off on immediate tariff implementation, the move injected fresh uncertainty into global markets. This uncertainty has supported gold prices, as investors remain wary of retaliatory actions from key trading partners and the broader economic impact of potential new tariffs.
Inflation Data Reinforces Concerns Over Price Pressures
Recent U.S. inflation reports showed stronger-than-expected price increases, adding to concerns that inflation remains persistent. The Consumer Price Index (CPI) rose 0.5% in January, surpassing expectations, while wholesale inflation, measured by the Producer Price Index (PPI), climbed 3.5% year-over-year. Both readings suggest inflationary pressures that could keep the Federal Reserve cautious on rate cuts.
However, some aspects of these reports hint at a potentially softer reading in the upcoming Personal Consumption Expenditures (PCE) index, the Fed’s preferred inflation gauge. Markets will closely watch this data for further insight into the inflation outlook.
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