Gold (XAUUSD) Price Forecast: Will Trump’s Greenland Deal Cool the Rally?

Gold Hits Record $4888.55 as Trump’s Greenland Gambit Shakes Markets

Spot gold price soared above $4800.00 to a new record high at $4888.55 on Wednesday as President Trump’s quest for control over Greenland added to already simmering geopolitical tensions, driving safe-haven demand. A weaker U.S. Dollar also contributed to the bullish tone as well as a favorable Gold/Silver ratio, but the key catalyst may have been the fear of missing out (FOMO).

By the end of the trading session, however, gold had trimmed nearly half of those gains after President Trump backed down from some of his sternest threats over Greenland. Trump fueled the late session sell-off after he withdrew a threat to impose tariffs on a number of nations for their stance on Greenland, saying he had reached the outlines of a deal with NATO on the island’s future, according to Reuters.

On Wednesday, XAUUSD settled at $4831.38, up $68.01 or +1.43%.

Trump Takes Center Stage at Davos: “I’m Seeking Immediate Negotiations”

Earlier in the session, President Trump spoke in front of thousands at the World Economic Forum in Davos, Switzerland. According to CNBC reporter Spriha Srivastava, Trump was met with loud applause as he opened his speech by saying it was good to see so many friends and “some enemies”. He then described himself as the most successful president while pointing out his major achievements accomplished in just one year.

Then the speech turned serious when Trump said, “I am seeking immediate negotiations to once again discuss the acquisition of Greenland by the United States.” Trump then added that he would not use force to obtain Greenland.

Profit-Taking Kicks In as Military Action Taken Off the Table

Gold started out strong ahead of the speech, but retreated from its high after Trump made his remark about not using the military to get what he wanted. The move in gold was likely profit-taking since it lifted some of the earlier uncertainty, giving some investors an excuse to trim their speculative positions.

While Trump initially held firm on both Greenland and the tariff threats during his speech, the situation evolved rapidly by day’s end.

Dollar Weakness Amplifies Gold’s Wild Swings

The weaker dollar earlier in the session also contributed to gold’s price swings on Wednesday. The “Sell America” movement put pressure on the greenback early, but it was able to recover when Trump took military action against Greenland off the table. Gold is a dollar-denominated asset so it will swing with dollar volatility.

Gold traders were also eyeing the Gold/Silver ratio that had been consolidating around 50.00 and looks extremely oversold since collapsing from a high of 82.863 on November 21. On Wednesday it surged to 52.514.

FOMO Fuels the Rally: Is $5000 Gold Within Reach?

I dug a little deeper into this week’s current price run which began on Monday, following five days of consolidation and concluded that some of this rally is probably the result of FOMO. Some speculators are buying out of fear of missing the “big” move to $5000 and possibly beyond.

What Happens Next: Will Traders Erase the “Greenland Tariff” Premium?

Now with the framework of a deal in place, gold traders may decide to trim the premium caused by the original tariff threat over the weekend. A complete erasure of the “Greenland Tariff” premium would take prices all the way back to last Friday’s close at $4596.32. A move of that magnitude would mean a minor support failure at $4712.52 and even a test of the uptrend line at $4631.93.

Essentially, we’re looking for a possible liquidation break following the negative headline, but not a change in the long-term trend. Traders are going to have to decide if the news of a deal is enough to continue taking profits, or if an announcement of an actual deal will exert more bearish pressure.

More Information in our Economic Calendar.