- Gold prices will trade in negative territory around $2,880 in early Asian sessions on Monday.
- Trump's tariff delays put pressure on gold prices and ease panic in the market.
- Uncertainty, increased trade tensions and lower USD could lead to a rise in Xau/USD prices.
Gold prices (XAU/USD) will be down to nearly $2,880 to benefit during the early Asian sessions on Monday. But the fear of the world trade war could help limit the loss of precious metals, in the wake of President Donald Trump's demand for mutual tariffs.
The Trump administration's tariff proposals are implemented, and the delay in making profits by traders will curb the rise in yellow metal. Trump on Thursday signed a presidential memorandum that plans to impose “mutual tariffs” on foreign countries. However, he delayed their implementation as he began negotiations on a single basis with countries where his administration could be affected. The fear of mitigation against the World Trade War places emphasis on gold prices, a traditional safe asset.
Investors will further closely monitor developments surrounding Trump's tariff policy. Signs of escalating trade tensions and uncertainties could increase the flow of safe havens that benefit safe metals.
Downbeat US economic data drags US dollars (USD) low. U.S. retail sales fell 0.9% in January from a 0.7% increase in December (revised from 0.4%), the U.S. Census Bureau said Friday. This figure fell below the market consensus of -0.1%.
Gold FAQ
Gold has played an important role in human history as it is widely used as a medium of value and exchange. Apart from the gem's brilliance and usage, precious metals are now widely viewed as safe haven assets. In other words, it is considered a good investment in times of turbulence. Gold is also widely viewed as a hedge against inflation and depreciation currencies, as it is not dependent on a particular issuer or government.
The central bank is the largest holder of money. With the aim of supporting currency in turbulent times, central banks tend to buy gold to diversify reserves and improve the perceived strength of the economy and currency. High gold reserves provide a source of trust in the country's solvency. The central bank added 1,136 tonnes of gold to its bookings in 2022, worth around $70 billion, according to data from the World Gold Council. This is the best purchase every year since the record began. Central banks in emerging economies such as China, India and Türkiye are rapidly increasing their gold reserves.
Gold is inversely correlated with the US dollar and the US Treasury, both major reserve assets and safe haven assets. As the dollar depreciates, gold tends to rise, allowing investors and central banks to diversify their assets during turbulence. Gold is also inversely correlated with risk assets. While rallies in the stock market tend to weaken gold prices, selling in high-risk markets tends to favor valuable metals.
A wide range of factors allow prices to move. The fear of geopolitical instability or deep recession can quickly escalate gold prices due to their safe conditions. As an asset that does not yield, gold tends to rise at lower interest rates, but the cost of higher money usually weighs the yellow metal. Still, most movements depend on how the US dollar (USD) behaves, as the asset's price is in dollars (Xau/USD). Strong dollars tend to keep the price of gold down, while weaker dollars can push the price of gold up.
