Gold prices retreated from recent record highs as investors locked in profits, while a modest rise in U.S. Treasury yields added downward pressure.
The precious metal’s decline was further influenced by shifting trade dynamics, with potential delays in tariffs on Mexico and Canada easing some economic concerns, reducing gold’s appeal as a safe-haven asset.
However, the market remains on edge after President Donald Trump announced a 25% tariff on EU cars and goods, reigniting fears of a broader global trade conflict. While the lack of clarity around the policy’s implementation has limited its immediate impact, the announcement underscores the lingering uncertainty that could support gold prices in the longer term.
This week’s economic data releases are adding complexity to gold’s short-term outlook. Today’s GDP report and initial jobless claims could shape market sentiment and influence expectations for U.S. monetary policy. On Friday, the Personal Consumption Expenditures (PCE) inflation data will be a key focus. Persistent inflationary pressures may reinforce the Federal Reserve’s hawkish stance, potentially weighing on gold. Conversely, signs of cooling inflation could revive hopes for Fed rate cuts, boosting gold’s attractiveness as a non-yielding asset.
Adding to the selling pressure are signs of weakening physical demand, particularly in China. Gold imports via Hong Kong fell to a near three-year low in January, raising concerns about subdued demand in one of the world’s largest gold markets. This slowdown in physical buying could further dampen prices in the near term.
Despite the recent pullback, gold’s longer-term outlook remains supported by a mix of geopolitical tensions, trade uncertainties, and evolving monetary policy expectations. Investors are likely to remain cautious, balancing profit-taking with strategic positioning as they navigate the interplay of economic data, trade developments, and central bank policies.
In the coming days, gold’s trajectory will hinge on how these factors unfold. While the metal may face headwinds from a stronger dollar and rising yields, its role as a hedge against uncertainty and inflation ensures it remains a critical component of diversified portfolios. As always, market participants will need to stay attuned to both macroeconomic trends and micro-level demand signals to gauge gold’s next move.
