Gold prices surged on Tuesday, fueled by a weaker US Dollar (USD) and escalating trade tensions between the United States, Canada, Mexico, and China. As new tariffs took effect, pushing market sentiment downward, gold became a safe-haven asset. The XAU/USD is trading at $2,918, up 0.62%.
The market reacted to the imposition of 25% tariffs on Canada and Mexico and an additional 10% duties on China, which came into effect around midnight. As concerns over the global economy intensified, traders flocked to gold, driving up demand for the precious metal. Meanwhile, the US Dollar weakened broadly against other currencies.
Economic data from the US has heightened recession fears. The Atlanta Fed’s GDPNow model now projects a 2.8% contraction in Q1 2025, down from an earlier forecast of 1.6%. Additionally, February’s ISM and S&P Global Manufacturing PMI readings showed mixed results. The ISM index slowed towards the 50 threshold between expansion and contraction, while the S&P PMI showed solid growth. These data points led to a decline in US Treasury yields, with traders pricing in potential interest rate cuts by the Federal Reserve.
As traders sought refuge in bullion, gold prices approached the $2,900 mark, with market focus now shifting to upcoming economic data, including the ISM Services PMI, Initial Jobless Claims, and February’s Nonfarm Payrolls.
Market Movers:
The US 10-year Treasury note rose by six basis points (bps), reaching 4.221%.
US real yields, measured by the 10-year Treasury Inflation-Protected Securities (TIPS), also rose by six bps to 1.858%.
St. Louis Fed President Alberto Musalem indicated that while the economic outlook remains positive, recent data present some risks to growth.
According to Prime Market Terminal, money markets have priced in 74 basis points of Federal Reserve easing, up from 70 bps last week.
XAU/USD Technical Outlook: Gold prices are currently poised to challenge the all-time high of $2,954 after bottoming at around $2,830.
The Relative Strength Index (RSI) shows bullish momentum, but gold buyers must first reclaim the $2,950 level. If surpassed, the next resistance could be the $3,000 mark. Conversely, if gold slides below $2,900, it may face further downside, with initial support at the February 14 low of $2,877, followed by $2,864.
As the economic outlook remains uncertain, gold continues to be a favored choice for investors seeking safety amid global trade tensions and recessionary fears.
