Gold recently reached unprecedented heights, hitting $2,954 amidst uncertainty surrounding trade policies. President Trump has intensified market anxieties by extending tariffs to include lumber and other soft commodities. Meanwhile, the U.S. economy shows mixed signals: manufacturing activity sees improvement, yet the services sector sees a contraction.
As the week drew to a close, gold edged lower but remained on track to end on a high note, marking eight continuous weeks of upward momentum. Currently, gold is valued at $2,940, a slight dip of 0.15%.
Much of the market tension continues to be fueled by President Trump’s ongoing tariff measures. Besides a 25% tariff on cars, pharmaceuticals, and chips, he has now extended these duties to include lumber and various soft commodities. This has driven many investors towards gold as a safeguard against trading uncertainties. While geopolitical concerns, especially regarding the Russia-Ukraine conflict, have eased, allowing some relief in the markets.
In terms of data, the latest U.S. business activity figures present a mixed picture. The manufacturing sector shows signs of growth, but the services sector is experiencing a downturn not seen since January 2023. Other economic indicators also paint a concerning picture, with existing home sales declining and consumer sentiment, as measured by the University of Michigan, continuing to worsen throughout February.
Looking at the day’s market movements, despite a dip in U.S. yields, gold prices didn’t capitalize on this opportunity. The U.S. 10-year Treasury yield fell by nine basis points, standing at 4.416%, while real yields, which are inversely related to gold prices, decreased by four basis points to 1.996%. The manufacturing industry experienced growth, exceeding expectations, while the services sector’s performance declined significantly. The University of Michigan reports a decrease in consumer sentiment, coupled with rising inflation expectations, adds to the cautious economic outlook. Concerns over Trump’s trade and immigration policies have also stirred worries about inflation, as revealed in the previous Federal Reserve meeting minutes. Following Trump’s presidency, global central banks have notably increased their gold reserves, signifying its importance as a stabilizer in uncertain times.
From a technical standpoint, while gold maintains a bullish trajectory, there’s a sense of momentum losing steam. The Relative Strength Index (RSI) indicates that the market might be heading towards a period of correction as it moves away from overbought territory. Key support levels to watch include the $2,900 mark—breaking below this could see gold prices targeting earlier lows. On the upside, surpassing $2,954 could set sights on resistance levels at $2,950 and potentially $3,000.
Historically, gold has been a cornerstone in financial systems, prized not only for its allure in jewelry but as a haven during turbulent times. Central banks, acknowledging the value of gold in bolstering economic credibility, have massively increased their holdings, notably emerging economies like China, India, and Turkey. Gold’s price movements are intricately linked to various factors, including geopolitical tensions and shifts in the dollar’s strength. As a hedge against inflation and currency depreciation, it remains a pivotal asset in diverse market conditions.
