27 Mar 2025

Gold prices are experiencing a resurgence on Thursday, driven by increasing trade tensions that heighten demand for safe-haven assets. A slight retreat of the US dollar from a multi-week peak, along with expectations of a Federal Reserve rate cut, also supports the XAU/USD pair. Market participants are anticipating Thursday's US macroeconomic reports for additional momentum ahead of the US PCE data release on Friday.

Throughout the first half of the European session on Thursday, the gold price (XAU/USD) retains a strong position near its weekly high and appears set for further gains amid a global shift towards safety. The announcement by US President Donald Trump of a 25% tariff on imported cars and light trucks, effective next week, escalates the risk of a worsening global trade conflict, dampening investor enthusiasm for riskier assets and benefiting the safe-haven gold.

Moreover, the increasing consensus that the Federal Reserve is likely to initiate a new round of rate cuts soon, combined with a modest decline in the US dollar from a three-week high, serves as an additional support for the non-yielding gold price. However, expectations for increased stimulus from China and a rise in US Treasury bond yields may pose challenges for the XAU/USD pair as traders await US macroeconomic data for new direction.

Daily Digest Market Movers: Gold Prices Supported by Trade Concerns and Weakening USD

The global risk appetite has been negatively affected by the announcement of new auto tariffs by US President Donald Trump on Wednesday. This, coupled with uncertainty surrounding Trump's potential reciprocal tariffs next week, has dampened investor sentiment and increased demand for Gold, a traditional safe haven, on Thursday.

The ambiguity regarding the effects of Trump's trade policies has compelled the Federal Reserve to lower its growth projections. Additionally, the US central bank indicated that it plans to implement two interest rate cuts of 25 basis points each in 2025. This development overshadows the positive US macroeconomic data released on Wednesday and exerts downward pressure on the US Dollar.

Specifically, the US Commerce Department reported a 0.9% increase in Durable Goods Orders for February, while Core Durable Goods Orders, which exclude the volatile transportation sector, rose by 0.7%. These figures exceeded consensus expectations and contributed to a rise in the USD to a three-week high overnight.

Chicago Fed President Austan Goolsbee informed the Financial Times that the next rate cut may take longer than expected due to economic uncertainties. He expressed concern that if markets begin to anticipate higher inflation, it would pose significant challenges for policy decisions.

Furthermore, Minneapolis Fed President Neel Kashkari noted that while the central bank has made substantial progress in reducing inflation, further efforts are necessary to achieve the 2% target. He also expressed uncertainty regarding the impact of Trump's aggressive policies on the US economy.

In a separate statement, St. Louis Fed President Alberto Musalem emphasized that there is no immediate need for the Federal Reserve to lower rates, as a restrictive policy remains essential to ensure inflation decreases to the 2% target. He anticipates that US economic growth will remain relatively strong, although tariffs may contribute to rising prices.

Traders are now looking ahead to Thursday's US economic data.