Gold Price Ends At $2,860 This Week; Will Trump-China Trade Tension Push Gold To $3,000 In Next 3 Months

Gold prices continued to trend bullishly during the trading week from February 3rd to 7th. After crossing a new high over the $2,880 per ounce level, gold prices closed the latest trading week at the $2,860 an ounce mark. The main driver of gold this week was an escalation of trade tensions between China and US as Donald Trump imposed a 10% tariff on the second-largest economy in the world. Meanwhile, investors hope two rate cuts from the US Federal Reserve this year. In India, RBI delivered its first rate cut in five years. Going ahead, brokerage Citi has upped its target on gold to the $3,000 mark in 2025.

Spot Gold Prices:

Spot Gold closed at $2859.5 an ounce, up by 0.5% on Friday. This was near its all-time level of $2,886.29 level which was touched during the week.

As per Trading Economics data, the gold price remained near its record highs amid growing expectations that major central banks will loosen monetary policy this year. Rate futures indicated that investors still expect the Fed to deliver two rate cuts this year despite evidence of a strong labour market, aligning with the last projections by FOMC members.

Also, the data pointed out that the Bank of England delivered a rate cut with more dovish than expected vote tallies, while the RBI delivered its first rate cut since the measure to respond to the pandemic nearly five years ago. Previously, the ECB and the BoC lowered rates with the latter ending quantitative tightening.

Further, explaining the reason behind the gold rally, VT Markets said, President Trump's decision to impose a 10% tariff on Chinese imports reignited trade war fears, prompting Beijing to retaliate with levies on US energy exports. Meanwhile, his remarks on US control over the Gaza Strip added to geopolitical uncertainty, further boosting gold's safe-haven appeal. It added, with key resistance at $2,853.85 and support at $2,798.49, traders are watching for further escalations in US-China tensions and upcoming US economic data. A push beyond $2,860 is possible if risk sentiment deteriorates while easing geopolitical risks could trigger a short-term pullback.

Gold has already surpassed VT Markets target of $2,860.

Following the surge in gold prices, global brokerage Citigroup Inc is now expecting the yellow metal to hit the $3,000 mark within three months. Citi cited the key reason for its target would be geopolitical tensions and trade wars after Trump's tariff and statement over Gaza.

Citi analysts said the gold bull market looks set to continue under Trump 2.0.

Last month, a team led by Chief Economist Nathan Sheets of Citi said, "Trump's policies represent a complicated mix of favourable and adverse supply and demand shocks. For U.S. economic growth, our forecast envisions these effects as perhaps balancing out. For U.S. prices, the effects look to skew toward some moderate upward pressures. The clear implication is that over the coming year, the Fed will need to remain alert for signs of emergent inflation pressures, and monetary policy may need to be a bit tighter."

The Citi team added, "For the rest of the world, Trump's tariff policies are by far the largest source of concern, with countries subject to tariffs facing an adverse demand shock as their access to the U.S. market diminishes, threatening to weaken growth and lower inflation and possibly requiring non-U.S. central banks to be more stimulative with policies."

Giving a geographical view of the impact that Trump's policies may cause, Citi's analysts said, that looking around the world, China's economy faces significant downside risks from the possibility of large tariffs. Europe also faces a range of question marks for Trump's second term, particularly in the areas of tariffs and security. Many of Trump's core policy concerns also touch Latin America in one form or another, with Mexico looking most exposed but Brazil and Panama additional names to note.

"From a broad perspective, asset prices in 2025 will be significantly driven by the path of Trump's policies," the report added.

That being said, the latest report of Citi believes a peace treaty between Russia and Ukraine, while clarity on whether gold will be exempted from Trump's tariff could stir upside momentum in gold over next 2-3 months. Thereby, Citi raises its target by $100 to $2,900 for the entire year, while maintaining the target at $3,000 an ounce for 6-12 months.