On February 11, as trading transitioned into European hours, the exuberant rise in international gold prices began to cool down after hitting an unprecedented peak of $2,942. The gold price has since tapered to around $2,910, indicating a near standstillThis volatility comes on the heels of the new U.S. government's announcement of increased tariffs on imports of steel and aluminum, prompting several hours of extreme fluctuation in gold pricing—initially surging to record highs before retracting.

At the time of this report, spot gold is holding steady at approximately $2,910, having briefly touched an altitude above $2,942. However, most of these gains have been reversedIn 2023 alone, gold prices have soared by about 11%, consistently setting historical precedentsThe destructive trade and geopolitical maneuvers undertaken by the U.S. are further entrenching gold's position as a store of value, driving traders to dissect how potential inflation incited by the White House's policies might influence both the U.S. economy and monetary policy.

Edward Meir, an analyst at Marex, asserts that “The trade war is evidently a key driver of this surge; it reflects growing uncertainty and tensions within the global trade arena.”

UK Gold Reserve Lines Forming

During the Asian trading hours, gold advanced towards the $3,000 threshold, peaking at $2,942, establishing itself as a haven for market players grappling with the uncertainties surrounding the new U.S. administrationCentral banks are actively acquiring vast quantities of gold, and investors are on the hunt for safe havens

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Concerns about U.S. tariffs have triggered a surge in gold withdrawals from the London vaults, taking it across the Atlantic.

Daniel Hynes, senior commodity strategist at ANZ, notes, “Gold in the Bank of England’s vault is being traded at a discount, leading to long queues for withdrawal.”

Global gold banks are airlifting gold from trade hubs in Asia, such as Dubai, to the U.S. in a bid to capitalize on unusually high premiumsCOMEX-registered gold inventories have surged to 34.6 million ounces, representing an increase of over 90% since November last year, which is the highest level since June 2022.

The London Metal Exchange has also reported a 1.7% monthly decline in gold holdings in London vaults, dropping to 8,535 tons, with a total value of $771.6 billion by January 2025.

Rodda observes, “Buyers appear to be less sensitive to price fluctuations, as dealers are pulling every string to get gold into the U.S. and avoid potential tariffs.”

Powell Faces CPI Ahead

Tariffs could exacerbate inflation in the U.S., prompting investors to await the release of the U.S. consumer price index on Wednesday and producer price index data on Thursday.

Meir highlights, “If the CPI and PPI data come in below expectations, it could drag down the dollar and elevate gold prices, while robust data could increase U.STreasury yields, exerting some pressure on gold

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Nevertheless, the market's resiliency and buying interest in pullbacks should help to limit this pressure.”

Investors are keenly watching for clues regarding monetary policy during Federal Reserve Chair Jerome Powell’s testimonies in Congress on Tuesday and WednesdayShort-term inflation expectations in the U.S. have outstripped long-term predictions, marking the widest gap since 2023, with the five-year breakeven rates climbing to 2.64% on MondayThis change may bolster arguments for a slowdown in monetary easing, which theoretically could be unfavorable for gold due to its lack of interest payments.

The increase in gold is accompanied by significant inflows into gold-backed exchange-traded fundsAccording to Bloomberg, global holdings have risen for six out of the past seven weeks, reaching the highest level since November on Monday.

Technical Outlook for Gold Looks Risky

Investment banks are predicting that gold prices will challenge $3,000 per ounceInstitutions like Citigroup communicated last week that they expect gold to reach that mark within three months, as geopolitical tensions continue to spur demandAnalysts at JPMorgan Private Bank project an end-of-year target price of $3,150 per ounce.

However, certain market indicators signal that the rapid rise in gold might be excessive, suggesting a potential pauseThe 14-day relative strength index for gold—an indicator that gauges the speed and intensity of price changes—has approached 80, significantly above the 70 threshold, where some analysts consider it a sign of overbought conditions.

Phillip Streible, Chief Market Strategist at Blue Line Futures, points out that since December, gold prices have shot up at a 45-degree angle, which could create a self-fulfilling prophecy further pushing prices up, possibly revising forecasts to around $3,250 or $3,500.

Independent analyst Ross Norman states, “Gold is clearly eyeing the $3,000 mark; the market is incredibly strong and appears almost unstoppable

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