Gold Prices Rally as Trump’s Tariffs Drive Safe-Haven Demand
Gold prices rebounded strongly on Monday after an early decline, with investors flocking to the safe-haven asset following U.S. President Donald Trump’s aggressive tariffs on Mexico, Canada, and China. The unexpected tariff announcement initially led to a dip in gold, but renewed demand quickly pushed prices higher, highlighting continued economic uncertainty.
The 25% tariffs on Canadian and Mexican imports, along with a 10% duty on Chinese goods, have fueled fears of slowing global growth and rising inflation. In response, Canada and Mexico introduced retaliatory measures, while China vowed to challenge the tariffs at the World Trade Organization and implement its own countermeasures. These geopolitical tensions have reinforced gold’s role as a hedge against economic instability.
Despite a surge in the U.S. dollar, which reached a three-week high and momentarily pressured gold, the metal remains near record levels. Last Friday, gold peaked at an all-time high of $2,817.22 before pulling back slightly. Analysts at UBS predict that gold could climb toward $2,850 in the coming months as geopolitical risks and inflation concerns persist.
As of 12:40 GMT, XAU/USD is trading at $2,807.60, reflecting a gain of $9.66 (+0.35%) from a session low of $2,772.21.
Bond Yields Drop as Investors Seek Stability
The bond market mirrored investor caution, with U.S. Treasury yields showing mixed performance. The 10-year yield declined by 4 basis points to 4.525%, while the 2-year yield edged up to 4.263%. Key economic reports, including U.S. job openings and nonfarm payrolls, are expected this week and could provide further insights into the Federal Reserve’s stance on interest rates.
Recent inflation data suggests the Fed may delay rate cuts, with the Personal Consumption Expenditures (PCE) Price Index showing a 0.3% increase in consumer spending—the largest gain since last April. This inflationary trend could keep the central bank cautious, preventing a significant downturn in the U.S. dollar.
U.S. Dollar Strength Impacts Global Markets
Trump’s tariffs have propelled the U.S. dollar to new highs, causing significant depreciation in major global currencies. The Mexican peso hit a three-year low, while the Canadian dollar plunged to its lowest level since 2003. Meanwhile, the offshore Chinese yuan weakened to a record 7.3765 per dollar.
The euro and Swiss franc also suffered losses, amid fears that Trump may extend tariffs to European goods. With the dollar strengthening and shifting interest rate expectations, global markets are preparing for potential economic disruptions. Analysts at Saxo Bank caution that escalating retaliatory tariffs could heighten the risk of stagflation—a scenario of weak growth coupled with high inflation.
Gold Price Forecast: Further Upside Likely Amid Uncertainty
Despite short-term headwinds from a strong dollar, gold’s long-term bullish trend remains intact. Support was found at $2,773.89 following the earlier sell-off, and a break above $2,817.22 could trigger a rally toward $2,850.
Conversely, failure to hold above the $2,773 pivot may lead to further declines, with the next major support at $2,730.56. Investors should closely monitor upcoming U.S. employment data, as it could influence Federal Reserve policy and impact gold prices.
For now, rising geopolitical tensions, inflation concerns, and safe-haven demand continue to drive gold’s bullish outlook. Market volatility remains high, but gold remains a critical hedge against economic uncertainty.
