Meanwhile, Silver (XAG/USD) followed a similar trend, trading at 93.13 and touching an intra-day high of 94.1365, supported by safe-haven demand amid US-Europe trade tensions.
Gold Rises as US-Europe Trade Tensions Escalate
Gold gained strength after US President Donald Trump announced plans to impose a 10% tariff on goods from eight European countries. These include Denmark, Sweden, France, Germany, the Netherlands, Finland, the UK, and Norway.
The tariffs are set to start from February 1 and will continue until the US is allowed to purchase Greenland. This unexpected announcement put pressure on markets and pushed investors toward safe-haven assets like gold.
As a result of this, the European Union quickly responded, with EU ambassadors agreeing to try and stop Trump from going ahead with the tariffs. At the same time, they are preparing possible retaliatory measures if the duties are applied. Hence, the uncertainty around trade tensions between the US and Europe created fear in the markets, boosting demand for traditional safe-haven assets.
US Economic Strength Supports Dollar, Puts Pressure on Gold
Moreover, a series of US economic reports, especially stronger jobs data, have reduced expectations for immediate US Federal Reserve (Fed) rate cuts. Investors now expect the next rate cuts to happen in June or September instead of January or April.
Therefore, the expectation that the Fed can keep interest rates higher for a longer time generally supports the US dollar.