Gold (XAU) Price Forecast: Nearing Record High as Dollar Sinks on Trump’s Policies

Gold Prices Near Record High as Dollar Weakens on Trump’s Policy Moves

Gold prices surged over 1% on Friday, approaching their all-time high, as a weaker dollar and U.S. President Donald Trump’s remarks on tariffs and interest rates bolstered demand for the precious metal. Spot gold climbed 0.58% to $2,770.88 per ounce, closing just $19.29 shy of its October peak of $2,790.17. The metal gained 2.51% this week, marking its fourth consecutive weekly advance.

Dollar Weakness Spurs Gold’s Rise

The U.S. dollar posted its worst weekly performance in over a year, losing 1.77% as the dollar index fell to 107.465, down from a high of 110.17 earlier this month. Market sentiment turned bearish on the dollar following Trump’s comments suggesting that upcoming tariffs might be smaller and less widespread than initially feared. This eased concerns over a global trade war and shifted focus to potential inflationary pressures, further supporting gold as a hedge against rising prices.

Trump’s call for lower interest rates at the World Economic Forum added to the dollar’s slide. A weaker greenback enhances gold’s appeal by making it more affordable for foreign buyers, further boosting its demand.

Tariff and Trade Uncertainty Lend Support

Trump’s rhetoric on trade, including a potentially “friendly” resolution with China, has left traders skeptical about the extent of future tariffs. Markets now anticipate announcements on tariffs targeting Canada, Mexico, China, and the European Union by February 1, diverting attention away from the upcoming Federal Reserve meeting. Expectations that the Fed will keep rates unchanged next week also bolstered gold’s attractiveness in a low-yield environment.

Inflation and Instability Keep Gold in Demand

Gold’s role as a reliable inflation hedge remains pivotal in this uncertain climate. With zero-yield assets like gold gaining favor during periods of economic instability, traders continue to position for potential central bank accommodation and elevated price levels. A short-covering rally has further amplified gains, though ETF flows remain mixed as traders weigh near-term catalysts.

Gold Prices Forecast: Testing Record Highs

Gold’s bullish momentum suggests a retest of its all-time high of $2,790.17 could be imminent. Continued weakness in the dollar, coupled with uncertainty surrounding tariffs and trade policy, provides a favorable backdrop for further upside. Traders should monitor tariff announcements and shifts in risk sentiment as key drivers of price action in the week ahead.

More Information in our Economic Calendar.