XAU/USD retreated after successfully maintaining a positive momentum for four consecutive days above $5,200 as the US dollar pared losses on uncertainty over trade policy and hawkish comments by several Fed officials.
At 8.30 am, gold prices were at $5,152, up 0.18% since it opened in early trading Wednesday in the Asian session.
The US Supreme Court on Friday ruled to reject the implementation of tariffs introduced by US President Donald Trump under the International Emergency Economic Powers Act (IEEPA).
The decision triggered a sharp jump in US equity markets on expectations of a change in trade policy.
In response, the Trump administration quickly enacted a 10% import duty across the board under Section 122, which took effect at midnight on Tuesday. The move was seen as an effort to maintain trade pressure despite legal constraints.
In the latest development, the White House announced that the tariff rate will be increased from 10% to 15%. The move increased market concerns and pushed gold prices higher as investors turned to safe assets.
Geopolitical factors also supported the yellow metal's rise. Tensions increased following reports that the US could launch targeted attacks on Iran.
While the White House insisted that diplomacy remained the main option, the Trump administration signaled that military action remained on the table if necessary.
On the Iranian side, the Deputy Foreign Minister said Tehran was ready to take the necessary steps to reach an agreement with Washington. The two countries are scheduled to hold a third round of talks in Geneva on Thursday, amid escalating tensions.
At the same time, Fed officials continued to maintain a cautious tone on monetary policy. Chicago Fed President Austan Goolsbee stressed that interest rates should be maintained as inflation remains above the 2% target.
Atlanta Fed President Raphael Bostic also supported the stance by emphasizing the priority of keeping price pressures under control.
While official statements tend to be hawkish, money markets are still pricing in around 54 basis points of easing by year-end, reflecting the divergence between policymakers' views and investor sentiment.
Heading into the week, market attention will be on a series of Federal Reserve officials' speeches on Wednesday, followed by US Initial Jobless Claims data on Thursday which is expected to provide further guidance on the direction of monetary policy.
