- Gold price continues with its struggle to gain any meaningful traction at the start of a new week.
- Worries about Trump‘s trade policies and Fed rate cut bets continue to support the commodity.
- The USD languishes near a multi-month low and further acts as a tailwind for the XAU/USD pair.
Gold price (XAU/USD) extends its sideways consolidative price move and holds steady above the $2,900 mark through the early European session on Monday. Investors remain worried about the potential economic fallout from US President Donald Trump’s trade tariffs and a global trade war, which continues to act as a tailwind for the safe-haven bullion. Furthermore, Friday’s weaker US jobs report reaffirmed market bets that the Federal Reserve (Fed) will cut interest rates multiple times this year and turns out to be another factor underpinning the non-yielding yellow metal.
Meanwhile, expectations for further policy easing by the Fed keep the US Dollar (USD) depressed near its lowest level since November touched on Friday, which, in turn, lends additional support to the Gold price. Despite the supporting factors, the XAU/USD has been struggling to attract any meaningful buyers and remains confined in a familiar range held over the past week or so. This, in turn, warrants some caution for aggressive bullish traders and before positioning for the resumption of the prior well-established uptrend in the absence of relevant economic releases from the US.
Daily Digest Market Movers: Gold price struggles to lure buyers despite Fed rate cut bets, weaker USD, trade war fears
- The uncertainty surrounding US President Donald Trump’s trade policies keeps investors on the edge and continues to act as a tailwind for the Gold price at the start of a new week. Moreover, investors remain worried that Trump’s protectionist tariffs could slow the US economic growth and force the Federal Reserve to resume its rate-cutting cycle in June.
- In fact, Trump took another pivot on his tariff agenda and said that impending tariffs on Canada may or may not come on Monday, or on Tuesday. This comes a day after the Trump administration temporarily waived off the 25% steep tariffs on goods from Canada and Mexico that comply with the US–Mexico–Canada Agreement for a month.
- Fed Chair Jerome Powell said on Friday that the uncertainty around Trump Administration policies and their economic effects remains high. Separately, San Francisco Fed President Mary Daly said late Sunday that rising uncertainty among businesses could dampen demand in the US economy but does not justify a change in the interest rates policy.
- Adding to this, the US monthly employment details released on Friday showed that the US labor market in the world’s largest economy slowed last month and reaffirmed bets for further policy easing by the Fed. The headline Nonfarm Payrolls print came in to show that the economy added 151K jobs in February against the 160K consensus forecast.
- Moreover, the previous month’s reading was revised down to 125K from 143K reported originally. Additional details of the report showed that the Unemployment Rate unexpectedly edged higher to 4.1% from 4.0% in January. This, to a larger extent, overshadowed a rise in the Average Hourly Earnings to 4% from 3.9% in January (revised from 4.1%).
- Traders are now pricing in about three rate cuts of 25 basis points each by the Fed by the end of this year. This, in turn, triggers a fresh leg down in the US Treasury bond yields, which keeps the USD bulls on the defensive. Despite the supporting factors, the non-yielding precious metal has been struggling to attract meaningful buyers, warranting caution for bulls.
Gold price needs to breakout through a short-term trading range before the next leg of a directional move
From a technical perspective, the Gold price has been showing some resilience below the $2,900 mark. Moreover, oscillators on the daily chart – though they have been losing traction – are still holding in positive territory. That said, the recent repeated failures to make it through the $2,925-2,930 supply zone make it prudent to wait for strong follow-through buying before placing fresh bullish bets. The XAU/USD might then aim to challenge the all-time peak, around the $2,956 region touched on February 24.
On the flip side, acceptance below the $2,900-2,895 horizontal zone might prompt some technical selling and drag the Gold price to the $2,860-2,858 horizontal zone. The downward trajectory could extend further towards the February 28 swing low, around the $2,833-2,832 area, before the XAU/USD eventually drops to the $2,800 round-figure mark.
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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