Gold soars past $4,700 as geopolitical and trade tensions escalate

LONDON (January 20) Gold (XAU/USD) hits yet another record high on Tuesday, climbing above the $4,700 psychological mark as rising geopolitical tensions drive strong safe-haven demand. At the time of writing, XAU/USD trades around $4,730, up nearly 1.25% for the day.

Market sentiment remains fragile as renewed US-EU trade tensions dominate headlines. Over the weekend, US President Donald Trump threatened fresh tariffs on eight European nations over the Greenland issue.

European leaders sharply criticized the move and warned that countermeasures are being prepared if the tariffs are implemented.

The developments have revived fears of a broader transatlantic trade war. The risk-off mood is weighing on global equities and strengthening demand for defensive assets.

Trump’s increasingly protectionist stance is also eroding confidence in US assets, putting pressure on the US dollar (USD) and prompting investors to shift into alternative G10 currencies and traditional safe havens such as Gold.

Beyond trade concerns, the ongoing Russia-Ukraine war and persistent tensions in the Middle East continue to keep geopolitical risk elevated. At the same time, robust institutional and investment demand alongside dovish Federal Reserve (Fed) expectations remain key drivers underpinning the metal’s broader uptrend.

Market movers: Trade tensions, court rulings and Fed leadership risks loom

• The US Dollar Index (DXY), which tracks the Greenback's value against a basket of six major currencies, extends its decline for a second straight day, trading around 98.45, near a two-week low.
• US President Donald Trump declined to rule out the use of military force to take control of Greenland in an interview with NBC News, responding, “No comment.” Separately, Trump wrote on Truth Social that Greenland is “imperative for National and World Security. There can be no going back — On that, everyone agrees!” after speaking with NATO Secretary General Mark Rutte, adding that the issue would also be discussed at the World Economic Forum in Davos.
• EU Foreign Policy Chief Kaja Kallas said Europe has “no interest in picking a fight” with the United States but will “hold our ground” and has “a slate of tools to protect its interests”. Analysts say the Eurozone could, in theory, use its large holdings of US assets, including Treasuries, as leverage if trade tensions with Washington escalate. The Eurozone is the largest foreign holder of US long-term Treasuries, accounting for around 21% of total foreign holdings.
• Markets are also bracing for major risk events this week, including a US Supreme Court ruling on the legality of President Trump’s tariffs, court arguments on Wednesday over Trump’s attempt to remove Fed Governor Lisa Cook over mortgage-fraud allegations, and a potential announcement of a new Fed Chair.
• Focus also turns to upcoming US economic data, with the ADP Employment Change 4-week average due later Tuesday, followed by the delayed Personal Consumption Expenditures (PCE) inflation data and third-quarter Gross Domestic Product (GDP) figures on Thursday. On Friday, attention turns to the preliminary S&P Global PMI surveys and the University of Michigan consumer sentiment data.

FXEmpire