Gold prices dipped slightly on Tuesday after a shift in U.S. President Donald Trump’s tariff rhetoric and a cautious outlook on rate cuts from the Federal Reserve, which tempered some of the economic uncertainties that had previously supported the precious metal.
As of 0224 GMT, spot gold was down by 0.1%, trading at $3,010.64 per ounce, while U.S. gold futures remained steady at $3,015.00. The recent pullback in gold prices comes after a period of strong gains, as improved market sentiment and easing tariff threats prompted some profit-taking. According to IG market strategist Yeap Jun Rong, gold’s recent outperformance had made it a prime target for profit-taking, as risk appetite increased due to the shifting rhetoric.
Trump’s Tariff Announcement
On Monday, President Trump hinted that some of the tariffs he had threatened to impose would not take effect on April 2. While he confirmed that automobile tariffs were still on the horizon, Trump also suggested that certain countries might receive exemptions. This news was well-received by Wall Street, as it signaled a potential easing of the trade tensions that have been weighing on global markets.
Despite the slight reduction in the tariff threat, the market remains cautious. Rong noted that the downside for gold seems limited, as uncertainty still lingers regarding the full scope and impact of the U.S. reciprocal tariffs. Gold continues to find support as a hedge against potential economic or geopolitical surprises, making it less likely to experience significant downward pressure in the near term.
Fed’s Cautious Rate Cut Expectations
The Federal Reserve’s stance on interest rates also played a role in moderating gold’s pullback. On Monday, Atlanta Federal Reserve President Raphael Bostic indicated that he expected slower progress on inflation in the coming months and revised his outlook to suggest only a modest 0.25% rate cut by the end of this year. Bullion, typically seen as a safe-haven asset that thrives in low-interest-rate environments, may face some headwinds if the Fed does not move more aggressively to cut rates.
Market Focus: Upcoming PCE Data
Looking ahead, markets are set to focus on the release of the Personal Consumption Expenditures (PCE) index on Friday, which is the Fed’s preferred measure of inflation. The data will likely influence market expectations for future rate cuts and could impact gold’s appeal as an inflation hedge.
Gold Miners Attract Inflows
Despite the slight dip in gold prices, funds investing in gold miners are seeing a surge in inflows, with March expected to bring the largest net monthly inflows in over a year. The strong performance of gold prices has improved the outlook for gold mining companies, leading to increased cash flow and investor interest in mining-focused funds.
Other Precious Metals
In the wider precious metals market, spot silver rose by 0.2% to $33.04 per ounce. Meanwhile, platinum eased 0.1% to $972.25, and palladium remained flat at $951.45.
In summary, while gold prices have experienced some pullback following improved risk sentiment and reduced tariff threats, the overall downside remains limited due to ongoing uncertainties surrounding global trade and U.S. monetary policy. As investors continue to seek gold as a hedge against economic and geopolitical risks, the precious metal remains a key asset in a volatile market.
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