Gold’s Resilient Rally Amid AI, Trade Risks, and Fed Uncertainty
Today’s market analysis on behalf of Dilin Wu Research Strategist at Pepperstone
JJust as gold was on the verge of breaking above $2,800, bears made a sudden move, disrupting the rally and pushing the market into a fierce tug-of-war. That said, I believe gold’s upward momentum remains strong.
Deepseek’s rapid rise has sparked concerns over AI valuations, triggering broad-based deleveraging across asset classes, including gold. However, as the market gradually realizes that Nvidia’s dominance remains intact in the near term and that China’s AI sector is far from posing a disruptive threat, risk aversion is making a comeback. This shift has removed a major obstacle to gold’s ascent, paving the way for further gains.
Beyond AI-driven volatility, gold’s appeal also lies in its role as a hedge against trade risks. The U.S. government’s firm stance on Colombia tariffs has reinforced its commitment to implementing a series of tariff measures starting February 1, prompting traders to reassess the likelihood of more aggressive tariffs ahead. Potential tariff policies could not only fuel domestic inflation and heighten economic uncertainty but also accelerate global “de-dollarization” efforts—both of which strengthen gold’s appeal.
Meanwhile, Trump’s increasing political pressure on the Fed to cut rates, coupled with declining 10-year U.S. Treasury yields and a weaker dollar, continues to support the case for gold’s near-term upside.
As traders remain focused on developments surrounding Deepseek and U.S. trade policies, attention has now turned to tonight’s Fed decision, Powell’s speech, and Friday’s core PCE inflation data. If Powell sticks to a hawkish tone and pushes back against rate cut expectations, gold could see a short-term pullback. However, given that the market has already priced in at least two rate cuts this year, a “dovish pause” could give gold a modest boost.
Additionally, U.S. inflation remains a key variable for gold’s trajectory. If core PCE comes in above the expected 2.8% year-over-year increase, it would give the Fed more reason to delay rate cuts, potentially disrupting gold’s rally. On the other hand, if the data comes in weaker than expected, it could amplify the divergence between the Fed and Trump, fueling volatility in gold prices. Either way, one thing is certain—the gold market is poised for heightened volatility.
