Gold soars amid trade war tensions; oil market remains stable
Gold continued its upward price momentum on Wednesday, posting a higher high for the fifth consecutive session.
Commodity analysts and bullion traders attribute this relentless climb to escalating concerns over international trade dynamics, particularly spurred by President Donald Trump’s recent tariff announcements.
The market remains in strong bullish territory, but with prices pulling away from support at $2,790.17, traders should be mindful of a potential near-term correction. While gold’s overall trend remains intact, the risk of a daily reversal is increasing as the rally extends, analysts said.
Ipek Ozkardeskaya, a senior analyst at Swissquote Bank, emphasised gold’s role as a hedge against geopolitical instability. “As international relations grow more chaotic, demand for gold rises, especially among central banks looking to mitigate exposure to U.S. policies,” she stated. Analysts now speculate that gold could easily target the $3,000 mark if current trends continue. On Wednesday, the price of gold in the UAE was reported at Dh337.35 per gram, a slight increase from Dh335.89 the previous day. Looking ahead, analysts predict that $2,900 is the next immediate target for gold, with $3,000 becoming a likely point of discussion. Despite recent fluctuations, buyers remain firmly in control, and any significant pullback would need to drop below the $2,800 threshold. “Taders should watch for potential reversals, especially if upcoming U.S. economic data suggests resilience in the labour market, which could strengthen the dollar and weigh on gold.”
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Barring any unexpected geopolitical events, gold could see a temporary pullback before resuming its broader uptrend. However, ongoing trade tensions and inflation fears continue to support gold’s appeal as a hedge, keeping the metal well-positioned for future gains.
In contrast, the oil and gas markets are expected to experience only limited short-term effects from President Trump’s new tariffs on Canada, Mexico, and China. The US administration announced on Saturday that tariffs would take effect on February 4, imposing a 25% tariff on imports from Canada and Mexico, and a 10% tariff on Chinese goods. Goldman Sachs has maintained its oil price forecasts for this year and next, suggesting that stable oil supply will mitigate immediate impacts on global oil prices.
However, the bank cautioned that US gasoline prices could see a short-term spike, particularly in the Midwest, where refineries heavily rely on Canadian crude oil. “Canadian oil producers are likely to bear most of the tariff burden, resulting in a $3 to $4 per barrel discount on Canadian crude,” Goldman Sachs analysts noted. They also pointed out that U.S. consumers of refined products might face an additional $2 to $3 per barrel increase.
Despite some initial upward movement in crude oil prices, concerns about the broader economic implications of a potential trade war loom large. Andy Lipow, President of Lipow Oil Associates, warned that retaliatory tariffs could lead to a global recession, causing oil prices to plummet in the medium term.
As for the immediate outlook, U.S. crude oil prices recently dipped below $71 per barrel but have since recovered due to renewed geopolitical tensions involving Iran. Analysts predict that crude prices will hover between $73 and $75 per barrel, with the $70 psychological support level becoming a focal point for traders.
Looking ahead, CareEdge analysts expect Brent crude prices to average between $75 and $80 per barrel over the next six months, driven by increased U.S. crude production, stable OPEC output, and steady Russian supply. However, a global economic slowdown and a shift towards electric vehicles and alternative fuels could limit any significant increases in demand for crude oil.
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