Gold prices continue to climb, reaching new highs, but the metal's volatile nature is expected to be tested this week by a confluence of powerful market forces.
The escalating trade war between the United States and China has fueled demand for safe-haven assets, driving up gold prices. However, statements from the US Federal Reserve (Fed) could have a significant impact on the precious metal's trajectory.
On Monday morning, spot gold prices rose slightly by 0.17% to US$2,865.16 per troy ounce. This follows a 0.14% increase on Friday, when gold reached a new all-time high.
Gold's recent surge is attributed to growing trade tensions between the US and China, prompting investors to seek refuge in safe-haven assets.
The coming week will see a number of significant events that could influence gold prices. These include President Trump's announcement of retaliatory tariffs, US inflation data, and testimony from Fed Chair Jerome Powell.
President Trump has indicated that he will announce retaliatory tariffs against several countries on Monday or Tuesday. This move is seen as a major escalation in his efforts to reshape global trade relations in favor of the US.
The trade war is considered a positive factor for gold, as the metal is often used as a safe-haven investment during periods of political and financial uncertainty.
The gold market has also been supported by the People's Bank of China's continued gold purchases and a new program allowing insurance funds to invest in gold.
Meanwhile, the US Labor Department reported that the US economy added 143,000 jobs in January, below the 170,000 expected by economists. The unemployment rate remained at 4%, slightly higher than the anticipated 4.1%.
The Fed's ability to adjust interest rates is being challenged by wage growth and slower job creation, creating a complex but potentially favorable situation.
Gold prices will also be impacted by US inflation data, which is due to be released on Wednesday. Lower inflation would be beneficial for gold, while higher inflation could weaken the metal's price.
Fed Chair Jerome Powell will deliver his annual testimony, including a statement, speech, and Q&A session, before the Senate Banking, Housing, and Urban Affairs Committee on Monday. He will also give a similar statement before the House Financial Services Committee on Wednesday.
Powell's statements are highly anticipated by the market, as they will provide insight into the Fed's future policy direction.
It is worth noting that Powell's previous testimony before the Senate has often caused significant market volatility.