Trump’s “Davos U-Turn” Sparks Relief Rally; Gold Plunges from Highs

Ultima Markets Daily Market Insights – January 22, 2026

The “Greenland Crisis” has ended as quickly as it began. In a dramatic reversal at the World Economic Forum in Davos, President Trump announced he is canceling the tariff threats on European allies after reaching a new “Arctic Security Framework” with NATO.

This diplomatic U-turn has triggered an immediate “Risk-On” explosion. Wall Street celebrated the avoidance of a trade war, sending equities soaring, while the “Fear Premium” that lifted Gold and safe-havens has evaporated, forcing a sharp liquidation in defensive assets.

Market Sentiment: The “Greenland Relief” Rally

Global markets have swung from “Trade War Panic” to “Relief Optimism” overnight. Trump confirmed military force is “off the table” and tariffs are suspended. This removes the biggest tail risk (a new round of trade war) from the market outlook.

The S&P 500 and Nasdaq surged over 1.5% yesterday, erasing the week’s losses. The “Magnificent Seven” tech stocks are leading the charge again as investors re-price a “Soft Landing” without the headwind of tariffs.

Outlook: Expect Asian and European sessions to follow the US lead today, buying dips in indices (DAX, Nikkei) as capital rotates out of cash and back into growth.

Impact on Assets: Another Round of “Rotation”

This change of events has triggered another quick “rotation” in the market over the last three days. The removal of the tariff threat has caused a violent rotation from “Safety” back to “Risk” again. This sets a clear outlook for the market today: risk assets are favored, while safe-havens face pressure.

Gold Outlook: The “Rug Pull”

Gold collapsed from its record high of $4,880, shedding over $50 in hours to close near $4,830, with the downside extending further during Thursday’s Asian session opening.

The “Geopolitical Premium” was priced out instantly. Without the threat of a trade war, there is no immediate need for a “Crisis Hedge,” sending the recently “overbought” Gold into a corrective move.

XAU/USD, H2 Chart | Ultima Markets MT5

With Gold now breaking below 4,800, this key level could now face a tug-of-war between the bulls and bears. In the near term, if we see Gold continue to be pressured below this key level, a further extended downside move is likely, while an attempt toward the 4,690–4,700 support remains a potential scenario.

Outlook: Watch the 4,800 level closely; a break below this level could trigger further liquidation, especially as the risk-off premium fades in the near term.

US Dollar Outlook: Uncertainty Still Here

For the US Dollar, both the fundamental and technical pictures remain confused. The Dollar failed to gain amidst the risk aversion of the last few days due to US involvement in the geopolitical tension and trade war.

However, the current “Risk-On” sentiment also poses pressure on the Dollar if capital rotates to other markets or currencies instead. Also, investors remain cautious of any uncertainty that could still re-emerge.

USDX, H4 Chart | Ultima Markets MT5

Still, over the technical outlook, the recent Dollar trend remains choppy near 98.50, having lost its clear direction for now. 98.50 could be the decisive level to watch next. The upside resistance remains near 98.80 – 99.00, while the key support lies at 98.00.

Outlook: The Dollar’s next move will likely only come after the PCE and other key major US data releases tonight. Technically, a clear hold or break of 98.50 will determine the next move.

What to Watch Today

The trade war risk and geopolitics are temporarily out of the picture, but remember they could still resurface with any update from Trump. Apart from that, the market will likely turn its focus to US key data today.

• US GDP (Q3 Updated Est) & Jobless Claims (8:30 AM ET): While backward-looking, a strong revision reinforces the “US Exceptionalism” narrative. Combined with Jobless Claims (Forecast: 205k), strong data will keep US Treasury yields supported, limiting the Dollar’s downside despite the trade war relief.
• US PCE Inflation Data: Now that the “Greenland Trade War” is off the table, the market cares 100% about the Fed again. If PCE comes in cool (0.1% or 0.2%), it confirms the “Soft Landing” and gives the Fed a green light to cut rates, sending the Dollar down while Gold may edge higher.
• Intel (INTC) Earnings (After Market Close): This is the key test for the “Chip Sector” and AI demand. A beat here would ignite a rally in the Nasdaq 100 tomorrow; a miss could stall the post-Davos relief rally.

Disclaimer

Comments, news, research, analysis, price, and all information contained in the article only serve as general information for readers and do not suggest any advice. Ultima Markets has taken reasonable measures to provide up-to-date information, but cannot guarantee accuracy, and may modify without notice. Ultima Markets will not be responsible for any loss incurred due to the application of the information provided.