Since the beginning of this year, gold prices have continued their upward trend and repeatedly hit new all-time highs. Among them, the COMEX gold price reached a peak of $2,976.4 per ounce. In early January, driven by strong consumer demand for gold during the Spring Festival holiday and heightened tensions in the Middle East, gold prices kept climbing. In mid-to-late January, market attention shifted to expectations of a Federal Reserve interest-rate cut. Although the U.S. January CPI rose more than expected, dampening short-term prospects for a Fed rate cut, the uncertainty surrounding Trump’s tariff policies continued to fuel gold’s upward momentum. In January, the COMEX gold price ended with a cumulative gain of 7%, closing at $2,831.50 per ounce—a “best January performance” since 2015. Since February, geopolitical developments have become the primary driver of precious-metal markets. In early February, ongoing negotiations between Russia and Ukraine, coupled with fluctuations in U.S. tariff policies, triggered repeated bouts of risk aversion in the market, pushing gold prices higher once again. Currently, as the Russia-Ukraine issue remains unresolved and U.S. tariff policies continue to fluctuate, precious-metal prices remain stuck in a high-level range. Domestically, precious-metal prices have followed the trend of international markets; on February 5—the first trading day after the Spring Festival holiday—Shanghai gold prices gapped higher at the opening, reaching a peak of 691.76 yuan per gram.

The U.S. economy remains resilient.

With Trump’s inauguration, market expectations for a stronger U.S. economy have intensified. Moreover, the policies adopted by Trump could boost robust U.S. economic growth and narrow the room for the Federal Reserve to cut interest rates without triggering a recession. As a result, market expectations for the U.S. economy may become even more optimistic.

Driven by growing orders and accelerated production, the U.S. January ISM Manufacturing PMI came in at 50.9, reaching its highest level since September 2022 and signaling an increasingly optimistic outlook for the manufacturing sector. Subcomponent data showed that the new orders index rose to 55.1, the highest level since May 2022 and marking the fifth consecutive month of increase, indicating a rebound in demand that may prompt manufacturers to ramp up output. The production index steadily entered the expansion range, climbing 2.6% on a monthly basis to 52.5—the highest level since March of last year. Meanwhile, the prices paid index reached 54.9, hitting a new high since May of last year, reflecting manufacturers' efforts to cope with rising costs amid robust demand.

However, the U.S. January ISM Services Index came in below expectations and declined from December of last year, indicating a slight weakening in the growth momentum of the service sector. The U.S. January ISM Services PMI stood at 52.8, slightly above last year’s average level. By component, the new orders index registered 51.3, falling to its lowest level in nearly seven months, suggesting that related activity may slow down over the coming months. The business activity index came in at 54.5, dropping to its lowest point in nearly five months, further signaling a slowdown in the service sector’s expansion momentum.

The U.S. nonfarm employment market remains resilient. In January, nonfarm payrolls increased by 143,000, the lowest level in nearly three months and significantly below the expected 175,000.

Overall, the U.S. economy remains resilient, the labor market continues to be robust, and U.S. inflation exhibits considerable stickiness. As a result, the Federal Reserve’s room for future rate cuts may be further constrained. However, this could provide some support for the U.S. dollar index and U.S. Treasury yields, potentially limiting the upside potential for precious metal prices.

Expectations of a rebound in U.S. inflation are rising.

The rebound in U.S. inflation expectations is a key factor providing long-term support for rising precious metal prices. As various U.S. policies continue to be implemented, the market is increasingly concerned that inflation—already slowing down only gradually—could once again pick up momentum. According to data from the U.S. Department of Labor, the U.S. CPI rose 3% year-on-year in January, higher than the previous value of 2.9%. On a monthly basis, it increased by 0.5%, not only exceeding the previous month’s growth rate of 0.4% but also marking the fastest pace since August 2023. The rise in U.S. CPI in January underscores that the disinflationary trend in the U.S. remains challenging, adding further evidence that the U.S. inflation slowdown has hit a snag. As new inflation risks begin to emerge—such as the impact of higher U.S. tariffs and constraints on labor supply growth—the Federal Reserve has yet to fully achieve its goal of bringing inflation down. Following the release of the U.S. January CPI data, markets now anticipate that the Fed may continue to delay interest-rate cuts. According to the CME FedWatch Tool, there is a high probability that the Fed will hold interest rates steady at its March meeting. Moreover, the likelihood that the Fed will refrain from cutting rates in June has risen to 66.1%, up from 50.3% previously. However, if inflation continues to rebound, the Fed might not cut rates at all in 2025—and could even consider raising interest rates instead.

The U.S. real interest rate is a key factor influencing the performance of precious metals. Specifically, the real interest rate can be broken down into two components: the nominal interest rate and inflation expectations. The level of the nominal interest rate largely depends on the Federal Reserve’s path and pace of interest-rate cuts. Currently, the U.S. economy has demonstrated surprising resilience, prompting the Fed to adopt a more cautious approach toward future rate cuts. As a result, the nominal interest rate is expected to trend downward, though the pace of this decline may slow down. Moreover, the primary drivers of U.S. inflation expectations are oil prices and core service-sector inflation. With growing expectations of a “soft landing” for the U.S. economy, coupled with geopolitical shifts and significant uncertainties in the global trade environment, U.S. inflation expectations are likely to rise further. In the long term, given the U.S. economy’s strong resilience, the Fed’s continued accommodative monetary policy stance, and the divergent policy agendas of the U.S. political parties, inflation in the U.S. could continue to rise. Consequently, the U.S. real interest rate is likely to trend downward, which will serve as a crucial long-term driver supporting higher prices for precious metals. Meanwhile, uncertainty surrounding U.S. tariff policies remains considerable.

Recently, there have been signs of easing in geopolitical tensions, yet the tariff standoff continues. Since U.S. President Trump officially took office, his policies have frequently undergone “reversals overnight,” yet this has failed to fully allay investors’ anxieties, as evidenced by the pronounced performance of gold prices. On February 1, Trump signed an executive order imposing an additional 10% tariff on goods imported from China. According to the executive order, the U.S. also imposed a 25% tariff on goods imported from Mexico and Canada, with the tariff increase on Canadian energy products set at 10%. On February 3, the U.S. announced that its plan to impose additional tariffs on goods from Mexico and Canada would be postponed for one month. On February 10, the U.S. announced it would impose a 25% tariff on all imports of steel and aluminum, applicable to steel and aluminum imports from all countries. In addition, the U.S. also announced that it would adopt a policy of reciprocal tariffs. At present, U.S. tariff policies still face considerable uncertainty. At this stage, U.S. tariff policies exhibit strong “instrumental” characteristics—meaning they offer great flexibility in diplomatic negotiations. This suggests that future market movements will likely fluctuate in response to developments in U.S. tariff policy negotiations.

Currently, the impact of U.S. tariff policies on the economy, inflation, and other factors has yet to fully materialize. With the exception of gold, which has shown relatively strong performance, the stock market has been lackluster. Although Trump announced on February 4 that he would impose an additional 10% tariff on China, this represents a certain easing compared to his campaign promise of a 60% tariff. Moreover, the 25% tariffs on Canada and Mexico, announced by Trump on February 3, have been postponed for at least 30 days, further fueling a wait-and-see attitude in the market. Therefore, the market still needs to closely monitor the actual effects of U.S. tariff policies as they are implemented. If subsequent U.S. tariff measures fall short of the market’s expectations in terms of their toughness, investor risk appetite is likely to rebound, and precious metal prices could face downward adjustment pressure.