Markets experienced fresh volatility to start the week, with a narrowly-avoided trade war between the US and Colombia, and a stock sell-off prompted by Chinese ‘AI’ app DeepSeek.

After climbing to $2,786.41 per ounce last Friday, just a few dollars off the all-time high, gold has slipped back to $2,744.89 at the time of writing. Gold is still 0.8% up in the past week however, with the US dollar index down on its recent peak. The weaker dollar means gold in pounds and euros have seen a sharper pull back, down 1.8% and 1.2% respectively from their peaks last week.

280125 USD Chart

The weekend brought a clear demonstration of Donald Trump’s intentions to use trade tariffs as a way to exert pressure on other countries, with Colombia threatened with 25% tariffs after their refusal to accept two planes of deportees. With Colombia backing down, the threat of a trade war has receded for now, but with Trump continuing to make claims over Greenland and Canada a similar tactic is likely to be deployed and could see a stronger resistance from those countries.

President Trump had previously suggested tariffs could be seen by February 1st on countries like Canada, Mexico and China, so next week could see further volatility surrounding tariffs.

Yesterday’s headlines were dominated by the growing popularity of the Chinese developed ‘AI’ app DeepSeek. The development and growth of the app caught markets off guard, and sparked a sell-off in tech stocks on claims that the app was developed at much lower costs to US rivals like ChatGPT. Nvidia in particular suffered a 17% drop in value, erasing $593 billion in the single biggest one day loss in history.

Markets have stabilised for now however and are bouncing back in some cases. Questions remain over the veracity of some of the claims surrounding DeepSeek’s development cost and its ability to be used more widely. It has certainly shaken up the market, and challenged the dominance of the US in the machine learning space, an area of major growth in stock markets over the past two years.

Wednesday will also see the Federal Reserve announce the latest decision on US interest rates. Despite comments from President Trump that he would demand for rates to be cut, markets are still overwhelmingly confident that tomorrow will see no change to rates, and that the first cut in 2025 will not be until summer.

The drop in price for gold and silver is a welcome buying opportunity for many investors, but gold in particular remains close to record highs and based on the first few weeks of the year, could still jump higher at any moment. With market volatility high, it will be difficult to time the dips before the next unexpected event sees prices rise once more.