- We have frequently pointed out the possibility of profit-taking selloffs in gold prices after they tested their all-time highs, reaching the resistance level of $2957 per ounce this week.
- Its losses due to technical profit-taking selloffs reached the support level of $2888 per ounce before quickly returning to stabilize around $2913 per ounce at the time of writing the analysis.
- Despite the selloffs, the gold market remains supported by the continuation of Trump's tariffs, which enhance investors' appetite for buying gold as a safe haven.
Reasons for the Decline in Gold Prices
The decline in gold prices coincided with the momentary decline from their all-time highs after US President Donald Trump said earlier this week that he would move forward with a plan to impose a 10% tariff on energy imports from Canada, in addition to a 25% tax on goods from Canada and Mexico, the two largest trading partners of the United States. Import taxes, including a 10% levy already imposed on products from China, are expected to slow global growth and suppress demand.
Saxo Bank commented on the performance of the gold market, stating that “safe haven demand remained strong amid tariff concerns. President Trump confirmed that tariffs on Canadian and Mexican imports will continue, keeping inflation and trade war risks in focus.”
According to factors affecting the gold market, the US dollar declined, which usually supports commodities priced in the currency. Treasury bond yields also decreased, reducing the cost of holding gold. Trading showed that the yield on the two-year US Treasury bond fell by 4.3 basis points to 4.117%, while the yield on the 10-year bond reached 4.319%, down 9.3 points.
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Will gold prices rise in the coming days?
Dear reader, despite the recent sales, the general trend of gold prices is still upward. Regarding the expected prices in the coming days, gold trading experts believe that the general trend of gold prices is upward and may quickly return to its upward path. What happened was a profit-taking sale, which is normal after the successive record gains. According to gold analysts' expectations, the uncertainty associated with customs duties and trade in general will continue to decline in gold prices as buying opportunities.
Trading Tips:
Dear TradersUp follower, keep a close eye on gold sales to get the best trading opportunities and take advantage of buying back from the declines as economic and political uncertainty will continue to support gold gains for some time.
According to recent trading, gold speculators reduced net long positions by 13,605 contracts to 201,962 in the week ending February 18, while SPDR Gold Trust holdings rose to 904.38 metric tons on Friday, the highest level since August 2023. At the same time, investors and economists expect the US Federal Reserve to respond "strongly and methodically" to changes in inflation and the labour market, according to research published by the Federal Reserve Bank of San Francisco earlier this week. Rising inflation may force the Federal Reserve to keep interest rates high, weakening the attractiveness of non-yielding gold.
Investors are now awaiting the release of the US personal consumption expenditures report on Friday, the Federal Reserve’s preferred inflation gauge, for insights into the path of interest rate easing and the US central bank’s monetary policy.
Trump Administration Policies and Their Impact on Dollar Performance
The US economic superiority has been the driver of the US dollar index’s outperformance since the pandemic, but it may finally be coming to an end thanks to Elon Musk’s Department of Government Efficiency (DOGE). chas remained resilient in the face of global economic uncertainty, but impending DOGE-related job losses and heightened political uncertainty could act as headwinds to its outperformance.
According to licensed trading platforms, the US dollar was the best performing major currency during the second half of 2024 as US economic exceptionalism came to the fore with a strong series of data releases that beat consensus. However, analysts warn that “near-term downside risks to the economy and markets are growing.”
Overall, if the data starts to perform poorly, markets will price in additional interest rate hikes from the Federal Reserve over the coming months, which will push down U.S. bond yields, which will mechanically weigh on the dollar.
DOGE is an interim government administration led by Elon Musk, whose purpose is to implement President Donald Trump’s agenda of cutting federal spending, deregulating and boosting productivity. Market consensus is expecting around 300,000 DOGE-related job cuts, but analysts have warned that the true number could be much higher when contract workers are included. Research by the Brookings Institution has shown that for every federal employee, there are two contractors. Accordingly, analysts see the layoffs as closer to 1 million. With 7 million unemployed in the 160 million-strong U.S. workforce, analysts have suggested that job losses could appear marginal.
However, they stressed that such a shock could still “push jobless claims higher in the coming weeks,” which could weigh on the outlook for federal policy. Despite the growing uncertainty about economic policy, the Fed did not react.
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