Gold price surges above $2910 as trade war fuels heaven demand
- XAU/USD extends gains amid geopolitical tensions despite solid US jobs data
- US tariffs on Canadian aluminum and steel imports begin on Wednesday, boosting Gold’s safe-haven appeal.
- Markets await US CPI inflation data on Wednesday and PPI on Thursday for the next Fed clues.
Gold (XAU) rallied on Tuesday as the trade war spurred demand for the yellow metal due to its safe-haven appeal. Upbeat United States (US) jobs data was ignored by traders, who continued to pile on Bullion. XAU/USD is trading at $2,917, up over 1%.
Sentiment has recently improved as Canada and the US de-escalated the threat of imposing tariffs. Concerns about an economic slowdown in the US exert downward pressure on US Treasury yields and the Greenback, which is a tailwind for Bullion prices.
Meanwhile, Trump’s trade tariffs on aluminum and steel imports will go into effect on Wednesday. The US Bureau of Labor Statistics (BLS) revealed that job openings rose in February.
Breaking news from Saudi Arabia revealed that Ukraine is ready to accept a ceasefire proposal, US Secretary of State Marco Rubio revealed. Ukraine’s President Volodymyr Zelenskyy added, “It is up to the US now to convince Russia to agree on a ceasefire.”
This could be a headwind for Gold prices, which tend to climb due to high geopolitical tensions and recessionary fears.
Meanwhile, XAU/USD traders eye the release of the Consumer Price Index (CPI) in the US on Wednesday, followed by the release of the Producer Price Index (PPI) on Thursday.
Daily digest market movers: Gold price unfazed by high US yields
- The US 10-year Treasury bond yield recovers and edges up six basis points to 4.282% as traders eye the Fed’s interest rate cuts.
- US real yields, as measured by the US 10-year Treasury Inflation-Protected Securities (TIPS) yield that correlates inversely to Gold prices, climb five-and-a-half basis points to 1.963%, a headwind for the non-yielding metal.
- The Atlanta Fed GDP Now model predicts the first quarter of 2025 at -2.4%, which would be the first negative print since the COVID-19 pandemic.
- The US JOLTS report showed that job openings rose to 7.740 million in January, up from 7.508 million, surpassing expectations of 7.63 million, signaling continued strength in the labor market.
- The People’s Bank of China (PBoC) continues to purchase Gold, according to the World Gold Council (WGC). The PBoC increased its holdings by 10 tonnes in the first two months of 2025. However, the largest buyer was the National Bank of Poland (NBP), which increased its reserve by 29 tonnes, its largest purchase since June 2019, when it bought 95 tonnes.
- Money market traders had priced in 77.5 basis points of easing in 2025, up from 74 bps last Friday, via data from Prime Market Terminal.
XAU/USD technical outlook: Gold price advances past $2,900
From a technical standpoint, Gold continues to trend up, but buyers need to clear last week’s peak at $2,930 on March 7 high so that buyers can challenge the psychological mark. A breach of the latter will expose the record high at $2,954, followed by the $3,000 mark.
Conversely, if XAU/USD drops below $2,900, the next support would be $2,850 ahead of the February 28 low of $2,832. Up next would be $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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