Gold prices rose to a new all-time high in early Wednesday trading, reflecting elevated safe-haven demand and a weakening US dollar. Investors are increasingly concerned about the possibility of a trade war between the United States and Europe, following Washington’s more aggressive stance on acquiring control of Greenland and Europe’s efforts to push back. This dynamic has so far resulted in an escalation of hostile rhetoric from both sides, which traders interpret as a sign that conditions could worsen. This has fuelled further demand for gold, the ultimate safe-haven asset, while also reviving the so-called “sell America” trade, putting downward pressure on the dollar. Attention now turns to today’s events in Davos, where the US President is due to deliver a speech and meet with European leaders. These discussions could mark the beginning of a solution, or alternatively lead to a further deterioration in relations, depending on how events unfold. As things stand, the path of least resistance for gold remains to the upside, supported by ongoing geopolitical turbulence, fears of a transatlantic trade war and a weaker dollar. These factors continue to enhance the precious metal’s safe-haven appeal, with the inverse correlation between gold and the dollar providing additional support.
Ricardo Evangelista, ActivTrades
Source: ActivTrader
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