Gold News: Can Gold Sustain Its Bullish Run Despite a Strong U.S. Dollar?

Gold Prices Rebound as Trump’s Tariffs Fuel Safe-Haven Demand

Gold prices bounced back on Monday after an early sell-off, with investors rushing to the safe-haven asset as U.S. President Donald Trump’s aggressive tariffs on Mexico, Canada, and China heightened fears of a global trade war. The market’s initial drop followed the unexpected tariff announcement, but gold quickly found support, signaling that demand remains strong amid economic uncertainty.

The 25% tariffs on Canadian and Mexican imports and a 10% duty on Chinese goods have sparked concerns about slowing global growth and rising inflation. Canada and Mexico swiftly announced retaliatory measures, while China vowed to challenge the tariffs at the World Trade Organization and implement countermeasures of its own. The ongoing tensions have reinforced gold’s appeal as a hedge against economic instability.

The U.S. dollar surged to a three-week high, initially pressuring gold prices, but the underlying safe-haven demand ultimately kept gold near its record levels. On Friday, the metal had reached an all-time high of $2,817.22 before pulling back. Analysts at UBS remain bullish, expecting gold to push toward $2,850 in the coming months as geopolitical risks persist.

At 12:40 GMT, XAU/USD is trading $2807.60, up $9.66 or +0.35%. This is up from a low of $2772.21.

Bond Yields Decline as Investors Seek Safety

The bond market reflected investor anxiety, with U.S. Treasury yields mixed on Monday. The 10-year yield dropped by 4 basis points to 4.525%, while the 2-year yield edged higher to 4.263%. Investors are closely watching economic data, including the U.S. job openings report and the nonfarm payrolls report due later this week, for further clues on economic strength and the Federal Reserve’s next move on interest rates.

Market sentiment suggests that the Fed may hold off on rate cuts, particularly after the latest Personal Consumption Expenditures (PCE) Price Index showed a 0.3% rise in consumer spending, the largest increase since last April. This inflationary pressure could keep the central bank cautious, limiting any potential downward pressure on the U.S. dollar.

Dollar Strength Threatens Global Markets

Trump’s tariffs sent the U.S. dollar soaring, driving several major currencies to multi-year lows. The Mexican peso tumbled to its weakest level in nearly three years, while the Canadian dollar fell to its lowest since 2003. The offshore Chinese yuan hit a record low of 7.3765 per dollar.

The euro and Swiss franc also dropped sharply, reflecting fears of further trade disruptions, particularly if Trump expands tariffs to European goods. With the greenback climbing and interest rate expectations shifting, global markets are bracing for potential economic fallout. Analysts at Saxo Bank warned that if retaliatory tariffs escalate, the risk of stagflation—weak growth paired with high inflation—could become a serious concern.

Gold Prices Forecast: Further Upside Likely as Uncertainty Grows

Despite short-term pressure from a strong dollar, gold’s underlying bullish trend remains intact. The earlier sell-off found support at $2,773.89, and prices rebounded from a session low of $2,772.21. If gold breaks above $2,817.22, it could trigger another rally toward the $2,850 mark.

However, failure to hold above the $2,773 pivot could lead to further declines, with the next key support at $2,730.56. Traders should remain alert to upcoming economic data, particularly U.S. employment reports, which could impact Fed policy expectations and influence gold’s direction.

For now, the combination of trade war fears, inflation concerns, and safe-haven demand keeps the outlook for gold skewed to the upside. The market remains volatile, but gold continues to serve as a key hedge in uncertain times.

More Information in our Economic Calendar.