Gold price rallies on haven demand amid trade and geopolitical tensions
- XAU/USD climbs to $2,888 as markets brace for tariffs, weaker US growth
- Gold snaps a two-day losing streak as risk-off sentiment drives safe-haven flows.
- Trump’s tariff threats, clash with Zelenskyy fuel market uncertainty.
- Atlanta Fed GDP Now forecast plunges to -2.8%, boosts Gold’s appeal.
Gold price is rallying over 1% on Monday, snapping two days of losses as the Greenback gets battered due to safe-haven demand and falling United States (US) Treasury bond yields. Geopolitical tensions and tariff threats by US President Donald Trump increased demand for the safety appeal of Bullion. XAU/USD trades at $2,888 at the time of writing.
Risk appetite deteriorated following the clash between US President Donald Trump and Ukrainian President Volodymir Zelenskyy last Friday. In the meantime, tariffs imposed on Mexico, Canada and China are expected to kick in on Tuesday.
Data-wise, business activity in the manufacturing sector in February was mixed, with S&P Global improving, while the ISM dipped but continued to expand.
In the meantime, the last round of US economic data pushed the Atlanta GDP Now Q1 2025 forecast model further deep into negative territory from -1.6% on February 28 to -2.8% as of writing.
Source: GDPNow
Therefore, traders seeking safety bought Bullion pushing prices on the way towards $2,900. The US 10-year Treasury note falls two basis points (bps) down to 4.176% levels last seen in December 2024.
Alongside the data, St. Louis Fed President Alberto Musalem said the economic outlook is for continued solid economic growth, but recent data pose some downside risks.
Daily digest market movers: Gold price surges amid pessimistic US economic outlook
- US real yields, as measured by the yield in the US 10-year Treasury Inflation-Protected Securities (TIPS), tumble almost three bps to 1.808%.
- The US ISM Manufacturing PMI for February held steady at 50.3, slightly down from 50.9 and below the 50.5 forecast, indicating a mild slowdown in business activity.
- S&P Global Manufacturing PMI showed improvement, rising to 52.7 from 51.2, surpassing expectations of 51.6, signaling continued expansion in the sector.
- Money markets had priced in that the Federal Reserve (Fed) would ease policy by 71 basis points (bps), up from 58 bps last week, revealed data from Prime Market Terminal.
Source: Prime Market Terminal
XAU/USD technical outlook: Gold price advances towards $2,900
Gold price uptrend resumed after two days of losses that drove XAU/USD below the $2,900 figure. Nevertheless, buyers stepped in near the $2,830 mark, lifting spot prices above $2,850, which exacerbated the rally toward $2,893. If buyers achieve a daily close above $2,900, bullion could be poised to challenge the year-to-date (YTD) peak at $2,954.
Otherwise, on further weakness, XAU/USD could aim toward the February 14 low of $2,877, followed by the February 12 swing low of $2,864. However, the broader uptrend remains intact unless XAU/USD drops below $2,800.
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
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