Gold Hits Highs on Trade Tariff Tensions

Trade tariff tensions look set to be a key theme in the first half of the year. While the reaction across asset classes has been mixed and volatile, gold has taken the opposite path—climbing steadily as investors seek safety.

Gold Shines Against Uncertain Backdrop

Posturing, threats, backtracking, and retaliation—Trump’s approach to tariffs has all the hallmarks of his first term, and the metals sector is back in the crosshairs. Today’s decision to impose 25% tariffs on all steel and aluminium imports is just the latest escalation in a steadily intensifying tit-for-tat trade war.

The response across asset classes has been uneven. Stock market reactions have been sector-specific, with car manufacturers and consumer-related stocks taking a hit, while currency markets have seen sharp swings. USD/CAD briefly surged to a 20-year high last week before reversing lower, highlighting the volatility.

Gold, however, has followed a more familiar path, benefiting from its traditional role as a hedge against inflation and trade uncertainty. With tensions escalating and inflation concerns creeping higher, the precious metal has found solid support, pushing to fresh highs.

Technical Outlook: Strong Momentum but Signs a Pullback is Needed

Gold is up more than 10% since the start of the year, breaking through key resistance and holding those gains. The trend remains strong, but there are a couple of signals that suggest we may see some short-term consolidation before the next move higher.

The first is the position of gold relative to its Keltner Channels. These bands, which use Average True Range (ATR) to adjust dynamically to volatility, typically contain around 85% of price action. When prices close outside the upper band for multiple sessions, it often suggests that momentum is running hot and a retracement may be due.

We’re also seeing the Relative Strength Index (RSI) push into overbought territory at 77. While this confirms strong momentum—and there’s no sign of negative divergence (where price moves higher but RSI starts to lag)—it does suggest that gold may be reaching an exhaustion point in the short term.

For traders looking to position within the broader trend, a pullback could provide a more favourable entry point. If any retracement unfolds in a low-volatility manner, it would reinforce the strength of the uptrend and present an opportunity to step in at better levels.

Gold Daily Candle Chart

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