Gold Price Forecast: XAU/USD slumps below $4,800 as Trump backs off European tariff threat

NEW YORK (January 21) Gold price ( XAU/USD) trimmed gains to near $4,790 during the early Asian session on Thursday. The precious metal retreats from a record high of $4,888 after US President Donald Trump backs off the European tariff threat and announces a framework Greenland deal.  

Bloomberg reported on Wednesday that Trump said he would step back from imposing tariffs on goods from European nations opposing his effort to take possession of Greenland. He added that the United States and the North Atlantic Treaty Organization (NATO) had "formed the framework of a future deal with respect to Greenland.” Hopes for a solution in Trump’s ambitions for Greenland that would avoid tariffs could undermine traditional safe-haven assets such as Gold in the near term. 

“Gold may be pausing, but the bull market is very much intact — with rate‑cut expectations, persistent geopolitical tensions and strong central‑bank buying keeping the risk skewed firmly to the upside,” said Ewa Manthey, commodities strategist at ING Groep NV. 

Nonetheless, Trump did not detail the parameters of the so-called “framework,” and it was unclear what the agreement entails. Germany's Finance Minister Lars Klingbeil warned against premature optimism after Trump backed off threats to impose tariffs as leverage to seize Greenland. Any signs of escalating tensions between the US and the EU could boost the yellow metal. 

Traders await the final reading of US Gross Domestic Product (GDP) for the third quarter (Q3), weekly Initial Jobless Claims and Personal Consumption Expenditures (PCE) Price Index data, which are due later on Thursday. In case of the weaker-than-expected outcomes, this could weigh on the US Dollar (USD) and underpin the USD-denominated commodity price. 

FXStreet