- Xau/USD will rise to $2,888 as the market takes on tariffs and weakens US growth
- Gold snaps two-day loss streaks as risk-off sentiment drives a safe haven flow.
- Trump's tariff threat clashes with uncertainty in the Zelensky fuel market.
- Atlanta Fed GDP is currently projected to -2.8%, enhancing Gold's appeal.
Gold prices rose above 1% on Monday, snapping two-day losses as greenbacks hit due to demand for safe havens and US (US) Treasury bond yields. The geopolitical tensions and tariff threats from US President Donald Trump have increased demand for bullion safety appeal. Xau/USD trades for $2,888 at the time of writing.
Risk appetite has worsened following the clash between US President Donald Trump and Ukrainian President Voldimir Zelenky on last Friday. In the meantime, tariffs imposed on Mexico, Canada and China are expected to begin on Tuesday.
Data-wise, business activities in the manufacturing sector in February were mixed, improving by S&P Global, while ISM has penetrated but continues to expand.
In the meantime, the final round of US economic data has led Atlanta GDP to a deeper depth from -1.6% on February 28th to -2.8% at the time of writing.
Source: GDPNOW
So traders looking for safety pushed the bullion towards $2,900. The US 10-Year Treasury Department has seen two basis points (BPS) last seen in December 2024 to 4.176%.
In addition to this data, St. Louis Federal President Alberto Mu Salem said the economic outlook is for continuous solid economic growth, but recent data poses several negative risks.
Daily Digest Market Movers: Gold Prices Surge amid a Pessimistic US Economic Outlook
- The true yield in the US is measured by the yield on the US 10th Treasury Department's Inflation Protection Securities (TIPS), falling to 1.808% to nearly 3 bps.
- The US ISM manufacturing PMI in February was stable at 50.3, falling slightly from 50.9, below 50.5 forecast, indicating a mild slowdown in business activity.
- The S&P Global Manufacturing PMI rose from 51.2 to 52.7, exceeding expectations of 51.6, signaling the sector's continued expansion.
- The Money Market relaxes its policy from 71 basis points (bps) from 58 bps last week to 71 basis points (bps), resulting in higher prices and data from its release. Prime Market Terminal.
Source: Prime Market Terminal
Xau/USD technology outlook: Gold price is moving towards $2,900
The rising trend in gold prices resumed after two days of losses that fell below the $2,900 figure. Nevertheless, buyers approached the $2,830 mark, lifting spot prices above $2,850, and exacerbating the rally towards $2,893. If a buyer meets a daily deadline of over $2,900, bullion can be poised to challenge the start of the year (YTD) peak at $2,954.
Otherwise, even weaker, Xau/USD aimed to go low at $2,877 on February 14th, and Swing Low on February 12th to go $2,864. However, the wider uptrend remains as long as Xau/USD is not below $2,800.
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.
