05 Mar 2025

Gold prices have experienced a decline as increasing US Treasury yields exert pressure on non-yielding assets. Nevertheless, the precious metal may benefit from safe-haven demand in light of the recent implementation of US tariffs. Additionally, gold attracted buyers following the suspension of military aid to Ukraine.

On Wednesday, the price of gold (XAU/USD) ended its two-day upward trend as rising US Treasury yields impacted non-yielding assets. Despite this, the precious metal could find support from safe-haven demand due to the introduction of US tariffs. The 25% tariffs imposed by Trump on imports from Mexico and Canada came into effect on Tuesday, coinciding with a rise in Chinese tariffs to 20%, which has heightened trade tensions and led to retaliatory measures.

In a Fox News interview, US Commerce Secretary Howard Lutnick indicated that Trump might reconsider his tariff strategy less than 48 hours after its initiation, suggesting that relief could be possible if the USMCA regulations are adhered to. However, the New York Times has reported that Trump has privately indicated his intention to maintain the tariffs.

Gold prices have declined as US Treasury yields rise. The US Dollar Index (DXY), which evaluates the USD against six prominent currencies, is currently around 105.70, experiencing an uptick alongside increasing Treasury yields, with the 2-year and 10-year bond yields at 3.98% and 4.25%, respectively.

Nevertheless, the USD is encountering downward pressure due to escalating concerns regarding a slowdown in economic growth and the repercussions of tariffs on the US economy. Market participants speculate that President Trump may seek to retract his tariff threats.

US Commerce Secretary Howard Lutnick remarked in a televised interview on Fox News that President Trump might reassess his tariff strategy within 48 hours of its enactment. Lutnick suggested that if the USMCA regulations are adhered to, Trump is contemplating providing relief. The 25% tariffs on goods from Canada and Mexico were implemented on Tuesday, coinciding with a doubling of duties on Chinese imports to 20%.

Canada has confirmed its intention to impose retaliatory tariffs on US imports, while China’s Commerce Ministry announced additional tariffs of up to 15% on key agricultural products imported from the US.

These developments heighten the risk of a global trade conflict, negatively impacting investor sentiment, which could serve as a supportive factor for the safe-haven precious metal and mitigate further losses amid a bearish outlook for the US Dollar.

The Institute for Supply Management's (ISM) Manufacturing PMI decreased to 50.3 in February from 50.9 the previous month, while the Prices Paid Index surged to a nearly three-year peak amid concerns regarding import duties.

This situation exacerbates fears that Trump's trade tariffs may hinder consumer spending and raise apprehensions about the future of the world’s largest economy, potentially providing additional support for the XAU/USD pair.

Technical Analysis: Gold Price Maintains Crucial Psychological Support at $2,900 Near Nine-Day EMA

As of Wednesday, the gold price (XAU/USD) is trading at approximately $2,910 per troy ounce. An examination of the daily chart indicates that the price of the metal is consolidating within an ascending channel pattern, which suggests that the bullish sentiment remains strong. Furthermore, the 14-day Relative Strength Index (RSI) remains above the 50 mark, which supports a bearish perspective.

The XAU/USD may aim for the primary resistance level at the all-time high of $2,956, achieved on February 24.

On the downside, immediate support is identified at the nine-day Exponential Moving Average (EMA) of $2,902. A decline below this threshold could diminish short-term price momentum and prompt a test of the lower boundary of the ascending channel at the $2,583 level.