Gold remains firm as markets await geopolitical developments

Gold prices rose from $2,880 per ounce to $2,900 per ounce early on Monday and hovered close to that level for the remainder of the day. If gold prices rise, they may encounter resistance at the psychological level of $2,950 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 $2,942 per ounce last week but have since dropped below the $2,900 per ounce level. 

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 remained steady on Monday, and the index hovered close to the 106.8 level. US treasury yields remained the same, with the US 10-year bond yielding 4.48%, as Monday was a Bank Holiday in the US in observance of Presidents' Day.

Reports that US President Donald Trump and Russian President Vladimir Putin agreed to initiate negotiations aimed at ending the war in Ukraine, eased geopolitical tensions last week. US President Donald Trump and Russian President Vladimir Putin are due to meet in Riyadh, Saudi Arabia on Tuesday. Hopes that the crisis between Russia and Ukraine might finally end, reduce the appeal of safe-haven assets, putting pressure on gold prices.

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%. Markets odds of rate cuts within the year are currently between 25 and 50 basis points as inflationary pressures remain high.

Fed Chair Jerome Powell delivered a mildly hawkish message after the policy meeting, putting pressure on gold prices. Powell stated that the Fed’s approach will remain data-driven and stressed that the central bank needs to consider potential policy changes under Trump’s administration. 

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.

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Written by:
Myrsini Giannouli

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