Gold prices dip as tariff concerns fade

Gold prices registered a new all-time high of $2,956 per ounce on Monday but could not maintain their bullish momentum and started to decline later in the week and dipped to $2,875 per ounce on Thursday. If gold prices rise, they may encounter resistance at $2,956 per ounce, while if gold prices decline, support may be encountered near $2,850 per ounce. 

Gold prices reached a new all-time high of $2,956 per ounce on Monday but could not maintain their bullish momentum as many traders rushed to take their profits. Gold prices had been trading in overbought conditions and have entered a bear market in the past few days. 

Uncertainty over US President Donald Trump’s future policies and trade tariffs promotes a risk aversion sentiment, raising the appeal of safe-haven assets, such as gold. Concerns that Trump’s trade policies may ignite global trading wars are raising the appeal of gold. 

US President Donald Trump has been using threats of imposing trade tariffs as a negotiation tool to further his agenda with other countries. Trump has threatened that he will announce reciprocal tariffs on many countries, which would raise US import taxes to match those imposed by the country’s other trading partners. If Trump goes through with these heavy tariffs, global inflation is likely to rise and the economic outlook will worsen, thus promoting a risk aversion sentiment that boosts safe-haven assets.

Trump’s tariff plans change rapidly, causing confusion and volatility in markets. Trump stated earlier this week that he intends to impose tariffs on Canada and Mexico. Trump’s plans of imposing 25% tariffs on Canada and Mexico had been postponed for a month after both countries agreed to tighten border activities. On Tuesday, however, Trump stated that he intends to go ahead with imposing tariffs on his neighboring countries on March 4. Trump backpedaled again on Thursday, pushing back the timeline of imposing tariffs to Canada and Mexico on April 2, lowering the appeal of safe-haven assets. 

Gold prices have been typically directed by the dollar’s movement, as the competing gold typically loses appeal as an investment when the dollar rises. The dollar gained strength on Thursday, and the index surged from 106.7 to 107.3. US treasury yields remained steady, with the US 10-year bond yielding approximately 4.28%.

Gold prices are under pressure by decreased Fed rate cut expectations. The US Federal Reserve held interest rates steady at its January meeting after delivering three consecutive rate cuts in 2024. FOMC policymakers voted unanimously to maintain the federal funds range to a target range of 4.25% to 4.50%. 

US Treasury Secretary Scott Bessent stated on Tuesday that trading tariffs are an important source of revenue and are an essential part of the US government’s economic policy. Bessent also stated that he aims to lower US treasury bond yields, while at the same time, ease monetary policy. US treasury yields dipped after Bessent’s speech and Fed rate cut expectations rose. Markets' odds of rate cuts within the year are currently above 50 basis points, up from less than 40bps last week.

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Written by:
Myrsini Giannouli

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