Although the higher-than-expected CPI data put pressure on the gold market, spot gold hit an intraday low of 2864.14 after the data was released, but because Trump may soon sign a reciprocal tariff executive order, gold eventually recovered all the intraday losses. As of now, the gold price is 2907.08.
The US January CPI data exceeded expectations across the board, and short-term interest rate futures traders cut the Fed's interest rate cut this year to about 26BP.
Trump: May sign a reciprocal tariff executive order on Wednesday local time; May meet with Putin in Saudi Arabia; Hope to close the Ministry of Education immediately.
The presidents of the United States and Ukraine had a call for about half an hour, and the two sides discussed the possibility of achieving peace between Russia and Ukraine; the presidents of the United States and Russia talked for more than an hour, and Trump said the call was fruitful. Both sides hope to end the conflict between Russia and Ukraine and agree to work closely and visit each other's countries.
Before Powell spoke, Trump urged the Federal Reserve to cut interest rates, saying that this move would complement the upcoming tariff policy.
Powell's second day of hearing: The latest data shows that inflationary pressures have eased but have not yet achieved the goal; there are some concerns about the liquidity of treasury bonds; there is still a long way to go to shrink the balance sheet; the Federal Reserve may have to adjust interest rates in response to tariff policies; do not want to hinder banks from providing cryptocurrency services to legitimate customers.
The Republican Party of the House of Representatives released the text of the budget proposal: it is planned to increase the debt ceiling by $4 trillion, cut taxes by $4.5 trillion, and reduce spending by $2 trillion in 10 years.
The US CPI for January released overnight rebounded beyond expectations. Spot gold continued to rebound after a short-term decline and closed above the $2,900 mark during the day. Federal Reserve Chairman Powell reiterated at the hearing that "the task of fighting inflation has not been completed and restrictive monetary policy needs to be maintained." Atlanta Fed Chairman Bostic expects inflation to fall back to the 2% target by 2026. After the data was released, the interest rate market's expectations for the extent of interest rate cuts this year also decreased from 40 basis points to 30 basis points, and the US Treasury yield and the US dollar index fell slightly after rising.
Gold ended a correction that lasted only one day and is currently stabilizing above $2,900. From a technical perspective, the price trend suggests that the long-short game is ready to go. The 14-day RSI remains in the overbought range but tends to flatten, which may indicate that the previous rally will continue after short-term consolidation.
On the upside, after stabilizing at the $2,900 mark, the main resistance level is seen at the historical high of $2,942. A confirmed breakthrough is needed to test the resistance of $2,950, followed by the most important $3,000 mark.
But if it falls back below the $2,900 mark, it may fall to $2,850. Subsequent important supports include the $2,970 to $2,800 that the cycle high on October 31 turned into support, and the band low of $2,730 on January 27.
Spot gold broke through its all-time high this week and moved further towards the $3,000 mark. This round of gains was mainly driven by market concerns about tariff policies and strong fundamental demand for gold itself.
This round of gains began at the bottom of the correction near $2,650. The recent rise means that a new rising phase has officially begun. The previous price correction has been fully completed, especially the rebound of gold prices after Fed Chairman Powell showed a clear hawkish stance and the US January CPI far exceeded expectations. Market sentiment showed a significant feature - traders tend to buy on dips, and this trading strategy has become a market consensus.
Of course, Trump's policy of imposing a 25% tariff on steel and aluminum has contributed greatly to the rise in gold. The tariff policy has intensified investors' expectations of re-inflation in the United States, which is the core factor stimulating the safe-haven demand for gold. Since mid-December last year, the cumulative increase in gold prices has reached 14%, showing a nearly parabolic upward trajectory.
I think it is only a matter of time before gold breaks through the $3,000 mark, and the breakthrough will come earlier than expected. But we need to be vigilant that although the fundamental support of gold is strong, the parabolic trend itself contains the risk of a deep correction. It's just that this round of rise is different from the past, and the strong underlying logic has delayed the arrival of the correction.
Compared with the strength of gold, I think investors need to be cautious about silver. Because it is obviously dragged down by weak industrial demand, the price increase is much weaker than gold, and even the strong rise last year has not approached the historical high. The divergence between the trends of gold and silver just reflects that the current market is more inclined to safe-haven attributes rather than the fundamental characteristics of industrial demand.
In recent months, the global gold market has undergone an unusually drastic change. London, historically the world's main gold trading center, is now facing a severe shortage of physical gold, while gold stocks in New York have soared to record levels. This unprecedented change has led to significant delays in withdrawals from the Bank of England's vaults, with waiting times increasing from the initial few days to up to eight weeks. Analysts point out that there are two main factors causing this confusion: concerns about possible US tariffs on gold, and transatlantic arbitrage opportunities brought about by New York futures prices being higher than the London spot market. However, these explanations alone cannot fully reflect the complexity of this shift.
Unlike industrial commodities such as steel or aluminum, where trade barriers and protectionist policies can incentivize domestic production, gold operates under a fundamentally different dynamic. The US government's position is reflected in the "Make America Great Again" agenda, which focuses on protecting and revitalizing American industries, while gold, as a non-manufactured asset, does not directly affect these industries. In fact, gold is a limited resource that cannot be artificially increased or replaced, because no degree of sanctions or tariffs can directly affect the gold production of a particular mine. Moreover, the United States is only the world's fifth-largest gold producer and lacks the production capacity to impose effective tariffs on gold.
The evidence suggests that the flow of gold from London to New York is not explicitly driven by tariff concerns. Instead, it reflects deeper financial incentives, such as arbitrage opportunities between London spot prices and U.S. futures contracts, as well as broader market adjustments driven by foreign central bank purchases and global economic uncertainty.
Another more plausible explanation for the shortage of gold in London is that central banks, especially those in emerging countries, have been increasing their gold purchases. These acquisitions have further tightened liquidity in London and reduced the availability of gold reserves used by financial institutions and dealers in London's strong over-the-counter market. Unlike previous periods when gold could be easily recirculated, most of the gold bars leaving London for Asia today are acquired by these countries and transferred to storage facilities outside the Western financial network, limiting its trading availability and exacerbating supply constraints. The reduction in gold reserves has made it increasingly difficult for dealers and financial institutions to obtain available gold, disrupting liquidity and reshaping the traditional gold market landscape.
But that doesn’t mean the U.S. isn’t storing physical gold. The Financial Times recently reported that since the 2024 U.S. election, about 393 metric tons of gold have been transferred to COMEX vaults, with inventory levels growing by nearly 75%, led by the three largest COMEX banks (HSBC, JPMorgan Chase and Bricks). However, this phenomenon may be more significant, as analysts say total inventories could be higher if additional gold shipped to private vaults owned by major financial institutions is taken into account.
One of the most important drivers of gold flows from London to New York is the growing arbitrage opportunities between the two markets. Since the end of 2024, COMEX gold futures contracts have been trading at a premium to London spot gold, a pattern that has repeated itself during periods of supply disruptions and increased investor demand. The market attributes the COMEX gold futures premium in part to logistical constraints and uncertainty. As the pace of gold shipments to the U.S. accelerates, some traders are trying to preemptively acquire physical holdings. However, despite the surge in gold stocks in COMEX vaults, the long-term impact of this shift remains uncertain.
Overall, the current shortage of gold bars in London and the corresponding increase in gold stocks in New York mark a major shift in the global gold market. While initial concerns about US tariffs were largely unfounded, deeper financial forces are at work, including central bank gold accumulation, arbitrage-driven transfers, and logistics constraints.
Since Trump's victory, more than 400 metric tons of physical gold have left London for COMEX warehouses in New York, resulting in a 75% increase in COMEX gold stocks (29.8 million ounces, or 926 tons). As always, the mainstream media attributes the large gold flows in part to concerns about future gold import tariffs, and also points to the potential arbitrage trade between the London gold spot price and the New York futures price. We believe that there is a more tragic truth behind the COMEX gold boom.
Banks post-Basel III will need more allocations/physical gold to comply with Basel rules. This poses a clear and present threat to the continued legal manipulation of the COMEX gold price by a handful of gold and TBTF “too big to fail” banks. These banks maintain a perpetual leveraged short position via daily (heavily leveraged) gold short contracts. For decades, COMEX gold could play this short game because almost every futures contract was just rolled over, not really physically delivered.
But now the game has changed. COMEX gold participants no longer roll over contracts, but demand physical delivery of gold (open interest up 750%). Why are traders suddenly seeking physical gold delivery? The answer is simple: in times of crisis, the world trusts physical gold far more than paper money, digital currencies or treasuries. The COMEX must be worried about whether there is enough physical gold to continue to maintain its short position. Artificially less short gold trading via COMEX futures contracts means a higher/fairer gold price. However, the COMEX has reloaded its inventories, so will the price manipulation continue?
It all depends on how much of the new reserves are reserves, rather than being used as a transit point for delivery to counterparties, who now want their gold in physical rather than paper form within their own control rather than sitting in COMEX warehouses. Ultimately, global demand for gold will rise and gold supply will tighten, all of which are extremely bullish for gold.