Gold prices made a strong recovery on Monday, bouncing back from the largest intraday decline in two months, as safe-haven demand continued to be fueled by fears of an impending trade war. By late afternoon trading, US gold for April delivery was priced at $2,911 per ounce, marking a 0.4% increase, despite holiday-thinned market conditions.
The precious metal’s gains came even after its 14-day relative strength index — a key indicator of market momentum — showed that gold had reached overbought territory in recent sessions, as reported by Bloomberg.
Meanwhile, the US dollar hovered near a two-month low, making gold more affordable for buyers holding other currencies. UBS analyst Giovanni Staunovo noted that gold’s rally is being driven by investors seeking safe-haven assets amid escalating trade tensions.
“Gold continues to benefit from concerns surrounding tariffs and the potential for a trade war,” Staunovo said in a Reuters report. “We expect further upside, with gold potentially rising to $3,000, supported by ongoing central bank demand.”
The rally comes on the heels of US President Donald Trump’s continued threats of tariffs, including new levies on automobiles set to take effect as early as April 2. These developments are part of a broader series of trade actions he has initiated since returning to office.
Markets are also keeping a close eye on diplomatic developments related to the war in Ukraine. US Secretary of State Marco Rubio emphasized on Sunday that any serious peace negotiations would require the involvement of both Kyiv and Europe in the discussions.
While gold remains a favored asset, concerns about reduced central bank demand in the event of a peace deal between Russia and Ukraine persist. Morgan Stanley, in a Friday report, highlighted the potential for diminished gold buying from central banks if the conflict were to de-escalate.
Traders are also closely monitoring recent US economic data, especially after Friday’s report revealed a significant slump in retail sales, the largest decline in nearly two years. This has led to speculation that the Federal Reserve may ease monetary policy, with expectations of interest rate cuts by September.
The latest data from the Commodity Futures Trading Commission showed that money managers reduced their bullish positions on gold to a four-week low for the week ending February 11. Despite this, gold still marked its seventh consecutive weekly gain, the longest winning streak since 2020.
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