- Gold prices will be around $2,915 for early Asian sessions on Monday.
- Global uncertainty and Trump's tariff threat support gold prices.
- The weaker the February job report, the lower the USD drag.
Gold Price (XAU/USD) attracts some buyers to around $2,915 during the early Asian session on Monday. The global uncertainty and the threat of the world trade war by US President Donald Trump provide some support to precious metals.
Last week, US President Donald Trump issued an executive order on Thursday that was exempt from both Canada and Mexico under the North American trade agreement known as the USMCA. However, U.S. Secretary of Commerce Howard Lutnick said late Sunday it is unlikely that the 25% tariff on steel and aluminum imports, which will take effect Wednesday, will be postponed. The uncertainty surrounding Trump's tariff policies could boost the flow of safe havens and benefit gold prices in the short term.
Furthermore, the US labor market was late last month. The report suggests that the Federal Reserve is on track to cut interest rates multiple times this year. This increases the weight of the US dollar (USD) and increases the religious commodity price of the US dollar.
Data released Friday by the U.S. Bureau of Labor Statistics (BLS) revealed that US non-farm payroll (NFP) rose 151,000 in February, and the 125,000 increase (revised from 143,000) reported in January. This figure is weaker than market expectations of 160,000.
Meanwhile, unemployment rates rose from 4.0% in January to 4.1%, while annual wage inflation, measured by changes in average hourly wage revenue, rose from 3.9% to 4.0% (revised from 4.1%).
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.
