Gold prices remained near record highs during Friday’s London trading session, despite President Donald Trump delaying plans for reciprocal tariffs, which led financial markets to adopt a risk-on stance.
A sharp decline in the dollar supported gold prices, as Trump’s decision caused the greenback to lose most of its recent gains.
Market action showed that spot gold continues to rise, trading at approximately $2,900 per troy ounce.
The rally in the yellow metal persists despite the high likelihood that the U.S. will intervene to end the conflict between Russia and Ukraine.
Gold’s Appetite Remains High
Trump’s hint at possible peace negotiations between Russia and Ukraine helped gold withstand the decline in safe-haven demand.
- This suggests that traders prioritize economic uncertainty over geopolitical developments. As a result, persistent concerns about inflation and the Federal Reserve’s monetary policy stance continue to drive high demand for gold.
- Gold was expected to rise roughly 2.5 percent for the week, marking its seventh consecutive week of gains. Demand for safe-haven assets persisted due to uncertainty surrounding Trump’s policies. On Thursday, Trump signed an executive order to examine potential reciprocal tariffs on significant U.S. goods.
- Additionally, Federal Reserve Chairman Jerome Powell confirmed in his testimony that interest rates are likely to remain unchanged for an extended period.
Higher yields in the U.S. Treasury market have historically weakened gold, but investors have opted to hedge with bullion due to ongoing uncertainty surrounding global inflation.
Gold prices are rising as the CME FedWatch tool indicates an increased likelihood that rates will remain unchanged through June.
However, the broader geopolitical environment also influences gold’s momentum. NATO negotiations and Ukraine-related tensions are straining risk assets, weakening the U.S. dollar.
The demand for safe-haven assets has risen due to President Trump’s hostage ultimatum, which has increased market uncertainty.
Trade and Tariffs Influence Market Sentiment
U.S. trading partners will be subject to restrictions by April. Unlike earlier threats suggesting immediate implementation, the new deadline has provided more time for negotiations with Washington, improving market sentiment. Earlier this week, Trump reinforced his tough trade stance by imposing 25 percent tariffs on steel and aluminum imports.
- According to technical analysis, gold prices broke out of the symmetrical triangle in which they had been consolidating since October’s record high, resuming their underlying uptrend in early January.
- Trump’s tariffs on the industrial sector have fueled speculation that American businesses may struggle to source domestic suppliers.
- Although copper was not subject to tariffs, traders were seen placing bets that the red metal could eventually be affected. Additionally, China imposed export restrictions on several essential materials, raising concerns about potential supply shortages.
- Strong central bank demand, geopolitical tensions, and expectations of a Federal Reserve rate cut are expected to support gold in the long term. Despite the potential for minor pullbacks, the overall trend remains bullish, with key upside targets now surpassing $3,000 per ounce.
Gold prices will largely be influenced by the Federal Reserve’s monetary policy signals and any further developments in U.S.-China trade relations.
