Will gold hit $3K? Traders go long as markets react to Trump & wage inflation

Gold prices hit another all-time high today at $2,942 per ounce. Prices gained as Trump confirmed that steel and aluminium tariffs will go ahead starting 12 March. The goal is to protect U.S. suppliers by making imported steel and aluminium 25% more expensive, regardless of their origin. However, it seems that Australia will gain concessions. The aim is to support domestic production by making it more costly for U.S. consumers to buy from overseas rather than American manufacturers. However, according to the Tax Foundation, a research organisation, U.S. industries consuming steel and aluminium are much larger than those producing them. In the short term, this policy is likely to have a negative impact.

Yet, in the long run, given global uncertainty and ongoing conflicts, many countries may prefer to strengthen their capacity to produce steel and aluminium.

Middle East tensions: How Trump's Gaza comments impact markets

The market is also reacting to Trump's latest comments on the Middle East. Trump reiterated that he wants the U.S. to own and control Gaza. When asked if Palestinians would be allowed to return, Trump said no.

He believes he can make a deal with Egypt and Jordan to take in Palestinian refugees and has suggested that military aid to these countries could be withdrawn if they refuse to cooperate with his plan.

U.S. Jobs report: strong hiring, inflation risks, and the Fed's dilemma

There are also other reasons why gold prices are rising. The latest Nonfarm Payrolls report, published on Friday, 7 February, showed that the labour market is performing too well for the economy, with the consequences of higher inflation. Up until now, the Fed has not acted, even though U.S. annual CPI reached 2.9%. As for the NFP report, the unemployment rate dropped from 4.1% to 4.0%, while wage growth increased by 0.5%, much higher than expected.

Normally, when the labour market is as strong as it is, and with headline inflation at 2.9% and core inflation even higher, the Fed would hint at a rate increase to tame inflation. However, with political uncertainty in the U.S., where officials are being fired or asked to resign, the Fed is likely feeling the pressure to please the government.

Tariffs vs. taxes: Trump's economic playbook

Another reason, while this is not yet discussed, but the bond market also heeds, is that we already know from Trump's inauguration speech that he prefers generating revenue through tariffs rather than income tax. He has also pushed for lower taxes and a smaller government on the campaign trail. While that is not the main focus at the moment, less than a month into his presidency, it will likely happen later, just as it did before when U.S. federal debt increased significantly due to tax cuts going unfunded.

Powell's speech & inflation data: The next big test for gold

Powell's speech and Q&A to the U.S. Banking Senate, today and tomorrow, are risks, too. Here, we will know more about whether the recent wage gains are a concern or if they will dismiss the surge. On Wednesday, the latest inflation report is due, and if it tops 2.9%, gold prices could be slightly lower. Much of the decline depends on what Powell says next.

Technical outlook: Traders eye the $3K Mark

From a technical point of view, traders are targeting the $3K mark, much like they targeted the $100K mark in Bitcoin just a few months ago. Both the short-term and long-term trends are bullish. The trend-defining level of the former is at Thursday's low of 2,832 and dips to Friday's high of 2,887, which buyers will likely meet.

The longer-term uptrend will remain in play as long as the price trades above the 27 January low of 2,730.