Rising US Treasury Yields Pressure Gold Prices
Gold prices continued to be under pressure as US Treasury bond yields rebounded after several sessions of decline. The rebound in bond yields was driven by a massive sell-off in German government bonds following the announcement of a €500 billion infrastructure fund and proposals to ease borrowing rules to boost defense spending.
The change in fiscal policy in Europe caused a surge in bond yields globally, strengthening the US dollar and reducing the appeal of gold as a safe haven asset.
US Dollar Strengthens After Trump Reiterates Tariff Strategy
The US dollar continued to strengthen after President Donald Trump reiterated his administration's aggressive stance on trade policy. In a speech to Congress, Trump confirmed that retaliatory tariffs will take effect on April 2, with a 25% levy on aluminum, copper, and steel.
The trade protectionist move supported the US dollar, thus putting additional pressure on gold as investors preferred currencies offering higher returns.
Trade Tensions Boost Gold Safe-haven Demand
Despite gold’s recent decline, geopolitical risks continue to support its appeal as a long-term safe-haven asset.
The US has now imposed 25% tariffs on Canada and Mexico, as well as an additional 10% on Chinese goods, prompting immediate retaliation from those countries.
Concerns over a prolonged trade conflict and potential stagflation in the US could see more investors turn to gold as a hedge against economic uncertainty.
US Economic Data Expected to Set Gold Price Direction
Investors are now focusing on US labor market data due out soon, which could potentially influence gold’s movements.
The ADP jobs report is expected to show a slowdown in private sector hiring, with an estimated 140,000 new jobs added in February compared to 183,000 in January.
In addition, a weaker-than-expected reading in the ISM Services PMI index could also heighten concerns over slowing economic growth, reigniting demand for gold as a safe-haven asset.
Gold Price Surge Risky if Trump Eases Tariff Policy
While gold remains a key safe-haven asset, its upside potential could be dented if the Trump administration signals a change in its tariff policy.
Any indication that the US may reconsider tariffs on Canada and Mexico could ease investor concerns and dampen gold's bullish momentum.
With volatility expected to continue, traders should remain vigilant about macroeconomic developments before making important trading decisions.
