Gold prices (XAU/USD) remain resilient near $2,985 after briefly reaching an all-time high of $3,005 during early Asian trading on Monday. The precious metal continues to benefit from a weaker U.S. dollar and growing economic uncertainty, particularly concerns surrounding a potential global trade war. Investors now turn their attention to the release of U.S. February retail sales data, scheduled for later on Monday.
Trade War Concerns Bolster Gold Demand
Mounting trade tensions between the United States and key global partners have unsettled financial markets, driving investors toward safe-haven assets such as gold. Last Thursday, U.S. President Donald Trump announced plans to impose a 200% tariff on European wine, cognac, and other alcoholic beverages. The move is seen as a retaliatory measure against the European Union’s (EU) forthcoming tariffs on American whiskey and other U.S. exports, set to take effect in April. These developments follow Washington’s implementation of a 25% tariff on steel and aluminum imports last Wednesday, further intensifying trade frictions.
Economic Data and Geopolitical Uncertainty Support Gold Prices
Gold’s bullish momentum is further fueled by a weakening U.S. dollar, following disappointing domestic economic data. The preliminary reading of the University of Michigan (UoM) Consumer Sentiment Index fell sharply to 57.9 in March, down from 64.7 in the previous reading and well below market expectations of 63.1. This marks the lowest level of consumer confidence since November 2022.
Geopolitical risks also contribute to gold’s strength. On Sunday, Yemen’s Houthi rebels claimed responsibility for an attack on the USS Harry S. Truman and its supporting vessels in the northern Red Sea, launching 18 ballistic and cruise missiles alongside drone strikes. “In a backdrop of geopolitical uncertainty and ongoing tariff changes, appetite for gold remains strong,” noted Suki Cooper, a precious metals analyst at Standard Chartered.
Potential Downside Risks for Gold
Despite the current uptrend, any signs of de-escalation in global conflicts could weigh on gold prices. Last week, the United States and Ukraine proposed a 30-day ceasefire to Russia. Trump’s envoy, Steve Witkoff, stated on Sunday that former President Trump is expected to engage in direct talks with Russian President Vladimir Putin this week, adding that Putin “accepts the philosophy” behind Trump’s ceasefire and peace framework.
While gold remains a favored safe-haven asset amid market volatility, developments in global trade policies and geopolitical negotiations will likely dictate its next move.
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