- Gold regained positive traction on Monday amid sustained USD weakness.
- Concerns about Trump’s tariffs further benefit the safe-haven XAU/USD pair.
- The fundamental and technical setup underpin prospects for additional gains.
Gold price (XAU/USD) sticks to its intraday gains near the $2,900 mark through the early European session on Monday, though it remains confined in a range below the all-time peak touched last week. The US Dollar (USD) languishes near its lowest level since December 17 touched in reaction to the dismal US Retail Sales data on Friday. This, along with worries that US President Donald Trump’s tariffs could trigger a global trade war, turn out to be key factors acting as a tailwind for the safe-haven bullion.
Meanwhile, the growing market acceptance that the Federal Reserve (Fed) would stick to its hawkish stance and keep interest rates on hold for an extended period helps limit the downside for the USD. Apart from this, the optimism over talks between the US and Russia aimed at ending the war in Ukraine, along with a generally positive risk tone, caps the Gold price. The near-term bias, however, remains tilted in favor of bulls and supports prospects for a further appreciating move for the XAU/USD pair.
Gold price attracts haven flows amid worries about Trump’s reciprocal tariffs, weaker USD
- The US Dollar languishes near its lowest level since December 17 touched in reaction to disappointing US Retail Sales data on Friday and helps revive demand for the Gold price.
- The US Census Bureau reported that Retail Sales declined by 0.9% in January, worse than the decrease of 0.1% expected and the 0.7% increase (revised from 0.4%) in December.
- The markets were quick to react and are now pricing in a rate cut by the Federal Reserve in September, rather than at the end of the year, further benefiting the precious metal.
- Kevin Hassett, Director of the US National Economic Council (NEC) said that a 40 basis points drop in 10-year US Treasury yield could be a sign the market expects lower inflation.
- US President Donald Trump ordered officials to formulate plans for reciprocal tariffs on countries that impose taxes on US imports, though he stopped short of announcing levies.
- Adding to this, Trump threatened that levies on automobiles would be coming as soon as April 2, fueling concerns about a global trade war and underpinning the XAU/USD.
- With US and Russian officials expected to hold talks in Saudi Arabia, Russian troops step up their attacks in eastern Ukraine, further boosting demand for the safe-haven commodity.
Gold price needs to move back above $2,925 barrier for bulls to retain near-term control
From a technical perspective, the Relative Strength Index (RSI) on the daily chart has eased from overbought territory, while other oscillators retain their positive bias. This, in turn, validates the near-term constructive outlook for the Gold price and supports prospects for a further appreciating move. That said, any subsequent strength might face a barrier near the $2,925 horizontal zone ahead of the all-time peak, around the $2,942-2,943 region. Some follow-through buying beyond the latter would be seen as a fresh trigger for bulls and pave the way for an extension of the recent well-established uptrend witnessed over the past two months or so.
On the flip side, the $2,885 region could offer immediate support ahead of last week’s swing low, around the $2,855 zone. Any further decline could be seen as a buying opportunity near the $2,834 area, which, in turn, should help limit the downside for the Gold price near the $2,815 region. This is followed by the $2,800 mark and the $2,785-2,784 support, which if broken decisively would set the stage for a meaningful corrective fall.
Tariffs FAQs
Tariffs are customs duties levied on certain merchandise imports or a category of products. Tariffs are designed to help local producers and manufacturers be more competitive in the market by providing a price advantage over similar goods that can be imported. Tariffs are widely used as tools of protectionism, along with trade barriers and import quotas.
Although tariffs and taxes both generate government revenue to fund public goods and services, they have several distinctions. Tariffs are prepaid at the port of entry, while taxes are paid at the time of purchase. Taxes are imposed on individual taxpayers and businesses, while tariffs are paid by importers.
There are two schools of thought among economists regarding the usage of tariffs. While some argue that tariffs are necessary to protect domestic industries and address trade imbalances, others see them as a harmful tool that could potentially drive prices higher over the long term and lead to a damaging trade war by encouraging tit-for-tat tariffs.
During the run-up to the presidential election in November 2024, Donald Trump made it clear that he intends to use tariffs to support the US economy and American producers. In 2024, Mexico, China and Canada accounted for 42% of total US imports. In this period, Mexico stood out as the top exporter with $466.6 billion, according to the US Census Bureau. Hence, Trump wants to focus on these three nations when imposing tariffs. He also plans to use the revenue generated through tariffs to lower personal income taxes.
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