Gold prices experienced a notable uptick late in the North American session on Wednesday, shrugging off the effects of rising US Treasury bond yields and a stronger US Dollar. As of the latest update, XAU/USD saw a gain of 0.63%, trading at $2,933, following the release of US inflation data that came in softer than expected.
According to the US Bureau of Labor Statistics (BLS), consumer inflation in the US eased slightly in February, but concerns persist. Despite the moderate inflation figures, investors remain wary of a potential second round of inflation, which could be triggered by aggressive tariffs on US imports. The February data has increased market expectations for the Federal Reserve (Fed) to implement three interest rate cuts in 2025. However, Fed officials, including Chair Jerome Powell, have emphasized that they will not base decisions on a single month’s data.
In the meantime, US Treasury yields climbed amid concerns that a global trade war could lead to higher prices. The US Dollar Index (DXY), which tracks the Greenback against six major currencies, rose by 0.14% to 103.55.
This uptick in yields coincided with the implementation of new tariffs on steel and aluminum imports, which took effect at midnight. The 25% tariffs, introduced by President Donald Trump, are part of an ongoing effort to reduce the trade deficit by imposing duties on imports.
Despite these developments, gold, a non-yielding asset, is poised to extend its rally, even as progress is made toward a potential truce between Ukraine and Russia. The World Gold Council (WGC) noted that central banks, including the People’s Bank of China (PBoC) and the National Bank of Poland (NBP), continued to add to their gold reserves in the first two months of 2025, purchasing 10 tonnes and 29 tonnes, respectively.
With these factors in play, gold is set to test the $2,950 mark. Market participants are also anticipating key upcoming economic data, including the US Producer Price Index (PPI) for February, Initial Jobless Claims, and the University of Michigan (UoM) Consumer Sentiment report.
Market Overview: Gold Remains Resilient Despite Rising Yields
On Wednesday, the US 10-year Treasury bond yield recovered, rising by three basis points to 4.314%. Additionally, US real yields, as measured by the US 10-year Treasury Inflation-Protected Securities (TIPS) yield, which typically move inversely to gold prices, rose by one basis point to 1.981%, capping gold’s gains.
The latest US Consumer Price Index (CPI) report revealed a 2.8% year-over-year increase for February, slightly below the expected 2.9% and a decrease from January’s 3.0%. This marks a continued moderation in inflation. Core CPI, which excludes volatile food and energy prices, fell from 3.3% in January to 3.1% year-over-year, reinforcing signs of ongoing disinflation in the US economy.
The Atlanta Fed’s GDPNow model forecasts a 2.4% contraction for the first quarter of 2025, marking the first negative print since the COVID-19 pandemic. As a result, money market traders have priced in 71 basis points of easing in 2025, down from 77 basis points the previous day, according to data from the Prime Market Terminal.
Technical Outlook: Gold Eyes $2,950
Gold has cleared the top of the $2,880 – $2,930 trading range and reached a two-week high of $2,940. With this breakout, buyers are now eyeing $2,950 as the next key resistance level, followed by the record high of $2,954. If gold surpasses this level, it could potentially challenge the $3,000 mark.
On the downside, if XAU/USD drops below $2,900, the next support level would be at $2,850, followed by the February 28 low of $2,832. A further decline could bring the price closer to the $2,800 mark.
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