Gold prices (XAU/USD) continued their upward trend on Tuesday, reaching a fresh daily high around the $2,918–$2,919 range during the early hours of the European session. This marks the second consecutive day of positive movement for the precious metal, driven by growing concerns over the economic repercussions of U.S. President Donald Trump’s trade tariffs. The tariffs, which could escalate into a global trade war, have sparked fears of a slowdown in global trade, providing a boost to gold as a safe-haven asset.
Trade Tariffs Fuel Concerns Over Global Economic Stability
Trump’s trade tariffs, aimed at Mexico, Canada, and China, have raised significant concerns about their potential impact on the world’s largest economy. Expectations that these tariffs will undermine consumer spending continue to weigh on the U.S. economy, keeping the U.S. Dollar (USD) depressed near its lowest level in over two months, which further supports the bid tone surrounding gold.
While gold has benefitted from the weakened dollar, expectations that the Federal Reserve may maintain higher interest rates for an extended period could limit any further gains for the non-yielding yellow metal. The potential for ongoing rate hikes by the Fed, designed to counteract inflationary pressures from the tariffs, could dampen demand for gold.
Geopolitical Risks and Economic Data Shape Market Sentiment
The ongoing trade tensions between the U.S. and its top trading partners are further compounded by persistent geopolitical risks. The implementation of Trump’s tariffs on Mexico, Canada, and a new 10% levy on Chinese goods on Tuesday has raised the risk of a full-blown trade war. In response, Canada confirmed that it would impose retaliatory tariffs on U.S. imports, while China’s Commerce Ministry announced additional tariffs on U.S. farm products. This escalation of trade tensions continues to unsettle markets, contributing to gold’s appeal as a safe-haven asset.
At the same time, the latest economic data has added to the market’s uncertainty. The Institute for Supply Management’s (ISM) Manufacturing PMI for February dropped to 50.3, down from 50.9 the previous month, signaling a slowdown in the manufacturing sector. Meanwhile, the Prices Paid Index surged to a nearly three-year high, reflecting growing inflationary pressures due to the tariffs. These factors raise concerns about the U.S. economy’s future performance, further bolstering demand for gold.
Geopolitical Events Add to Market Volatility
The geopolitical landscape has also contributed to increased market uncertainty. Ukrainian President Volodymyr Zelensky’s recent meeting with President Trump ended in disappointment, and a White House official confirmed that the U.S. has paused military aid to Ukraine. These developments have added to the already volatile market environment, fueling investor demand for gold as a safe-haven asset amidst rising geopolitical tensions.
Market Focus Shifts to U.S. Nonfarm Payrolls Data
Looking ahead, traders are awaiting the release of the U.S. monthly employment report, commonly known as the Nonfarm Payrolls (NFP) report, scheduled for Friday. This key economic data is expected to influence the U.S. Dollar and could have a significant impact on gold prices. If the report points to a weaker-than-expected job market, it may prompt further concerns about the U.S. economy and support gold prices in the short term.
Technical Outlook: Gold Price Faces Key Resistance Levels
From a technical perspective, gold’s price action indicates a cautious but positive outlook. The failure to sustain momentum above the $2,900 level raises some caution for bullish traders. However, oscillators on the daily chart remain in positive territory, suggesting that there may be opportunities for dip-buyers near the $2,860 support level. If the price drops further, the $2,833–$2,832 region, where the multi-week low was touched last Friday, could provide additional support. A fall below this level could accelerate gold’s decline towards the $2,800 mark.
On the flip side, bullish traders may wait for a sustained breakout above the $2,900 level before committing to new positions. If gold can break through this level and maintain upward momentum, it could target the $2,934 resistance zone, and potentially even revisit the record high of $2,956 touched last Monday.
Conclusion
Gold’s steady rise is fueled by a combination of factors, including the escalating trade war between the U.S. and its trading partners, ongoing geopolitical risks, and concerns about the U.S. economic outlook. As traders anticipate key economic reports, including the Nonfarm Payrolls data, the outlook for gold remains positive, with the metal benefiting from its safe-haven status. However, with resistance levels ahead and expectations of prolonged Fed rate hikes, any further gains may be capped unless market conditions shift.