Safe-haven assets surge after Trump’s tariff announcement

The US dollar strengthened while Gold soared to a new record after President Donald Trump announced plans to impose tariffs on steel and aluminum imports, sending fresh waves of uncertainty across global markets.

The Japanese yen and the Canadian dollar took a hit against the greenback as investors reacted to the news, pushing the Bloomberg Dollar Spot Index to its highest level in nearly a week. Market participants worry that higher tariffs could fuel inflation, potentially restricting the Federal Reserve’s flexibility in lowering interest rates. Meanwhile, Gold surged to $2,903.21 per ounce, as heightened trade tensions drove demand for safe-haven assets.

In the equities market, futures for the S&P 500 and Nasdaq 100 rebounded at least 0.4%, signaling a recovery from Friday’s steep declines. The tariff announcement provided a significant boost to US metals stocks, with United States Steel Corp. jumping 15% in premarket trading, while Alcoa Corp. rose by 5%. Across the Atlantic, Europe’s Stoxx 600 index advanced, led by a surge in BP Plc shares, which saw their biggest jump since 2020 following news that Elliott Investment Management had acquired a stake in the company.

Trump’s proposed 25% tariffs on steel and aluminum, set to be formally announced Monday, further added to the already heightened market uncertainty ahead of Federal Reserve Chair Jerome Powell’s congressional testimony. Additionally, Trump may unveil reciprocal tariffs on multiple countries later this week. Although he confirmed that the tariffs would apply to all imports, he did not specify a timeline for implementation.

The recovery in US stock futures indicates that some investors see buying opportunities after last week’s 1% decline in the S&P 500. Markets remain on high alert for several key events in the coming days, including Powell’s testimony and the release of US Consumer Price Index (CPI) data.

Gold’s surge shows no signs of slowing as tariffs fuel inflation concerns

The rally in Gold appears far from over, as rising tariffs are expected to drive up production costs and sustain inflationary pressures. In an environment of protectionist policies and trade uncertainty, Gold stands out as a clear beneficiary.

With prices inching closer to the $3,000/oz mark, trade tensions could be the catalyst that propels them even higher. History suggests this isn’t far-fetched—when Trump introduced broad tariffs in 2018, Gold prices climbed nearly 50% over the following two years as investors sought protection from economic instability and inflationary risks.

The current landscape is even more favorable for Gold. Beyond escalating geopolitical and trade tensions, not just with China but across the globe, central banks are aggressively increasing their Gold reserves at record levels. Domestic US demand for the metal is also surging, reinforcing the upward trend.

Unlike previous cycles, Gold’s rally isn’t being hindered by a strong dollar. Instead, the metal is thriving alongside the greenback, signaling widespread demand for assets that serve as a hedge against systemic risks. Further fueling the momentum, China’s recent policy shift allowing insurers to allocate part of their portfolios to Gold could unlock billions in new investment inflows, providing yet another tailwind for bullion’s ascent.

DXY limited rally

Despite the US dollar’s advance over the past three days, including today, the current rally appears to be limited, largely influenced by Trump’s recent decision. Analyzing the time and price action suggests that the index may have the potential for another downward leg in the coming weeks. This is especially true considering that the bullish relationship between time and price ended on January 20th, leaving the door open for further declines. For the index to regain a bullish trend, it would need to break the high set in January. On the downside, the next key support level is at 107.30.

EURUSD holding above 1.03

The Euro has maintained a position above 1.03 for over two weeks and has successfully recovered from the significant declines experienced at the start of last week. This situation mirrors that of the dollar index, though in the opposite direction. The bearish relationship between price and time ended on January 21st, allowing for the possibility of a recovery in the coming weeks.

Currently, the technical indicators are not sufficiently bullish; however, this setting opens the door for a potential positioning phase, provided the Euro continues to trade above the 1.03 and 1.02 levels. On the upside, the key resistance levels to watch are at 1.0350 and 1.0450.

Prepared by Nour Hammoury, Chief Market Analyst at SquaredFinancial
Nour is an investor, independent market strategist, and financial advisor. He holds a BA in Finance and Banking Science from Al-Ahliyya Amman University and a CFTe in Economics from the International Federation of Technical Analysts. He has more than 15 years of experience in forex, stocks, and global economic developments, as well as central bank policies and intermarket analysis. He appears regularly on major international TV networks, such as BBC, Al-Jazeera, Al Hurra, CNBC, and Bloomberg, holding open discussions and sharing insights and readings of the markets and trends.

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