Gold price (XAU/USD) advances to the $2,880 region during the Asian session on Monday in reaction to US President Donald Trump’s plans to impose new 25% tariffs on all steel and aluminum imports into the US. The announcement sparks concerns about a global trade war and benefits the safe-haven precious metal. Furthermore, expectations that Trump’s protectionist policies would reignite inflation turn out to be another factor that underpins the commodity’s status as a hedge against rising prices.
Meanwhile, the upbeat US employment details released on Friday and inflationary concerns could limit the scope for the Federal Reserve (Fed) to ease further. This, in turn, assists the US Dollar (USD) in gaining some follow-through positive traction at the start of a new week and could act as a headwind for the Gold price. Apart from this, overbought conditions on the daily chart might hold back traders from placing fresh bullish bets around the XAU/USD in the absence of any relevant US economic data.
Gold price remains well supported by concerns about a global trade war
US President Donald Trump said on Sunday he will introduce new 25% tariffs on all steel and aluminum imports into the US. Trump added that he would announce reciprocal tariffs on all countries and match their tariff rates, bolstering the safe-haven Gold price at the start of a new week.
Russian Deputy Foreign Minister Galuzin said there are no satisfactory proposals to start talks on Ukraine, and that statements from the West and Ukraine are nothing but buzz-building. US Vice President JD Vance is supposedly headed to Germany this week to lay out details of the US proposal.
Investors remain worried that Trump’s trade policies could put upward pressure on inflation in the US. This, along with the upbeat US Nonfarm Payrolls (NFP) report released on Friday, could limit the scope for the Federal Reserve to ease further and might cap the non-yielding yellow metal.
The closely-watched US monthly jobs data showed that the world’s largest economy added 143K jobs in January compared to 170K anticipated and the previous month’s upwardly revised reading of 307K. This, however, was offset by an unexpected dip in the Unemployment Rate to 4.0%.
Minneapolis Fed President Neel Kashkari said on Friday that he would move towards supporting further rate cuts if they see good inflation data and the labor market remains strong. Kashkari added that we are in a good place to sit here until we get more information on the Trump administration’s policies.
Chicago Fed President Austan Goolsbee noted that inconsistent policy approaches from the US government cause a high level of economic uncertainty that makes it difficult for policymakers to draw a bead on where the economy, and inflation specifically, is likely heading.
Meanwhile, Fed Board of Governors member Adriana Kugler said that US growth and economic activity remain healthy overall, but noted that progress toward the 2% inflation goal has been somewhat lopsided. Recent progress on inflation is slow and uneven, Kugler added.
A modest US Dollar strength could hold back traders from placing aggressive bullish bets around the commodity. Traders now look to Fed Chair Jerome Powell’s semi-annual congressional testimony and the US consumer inflation figures for a fresh directional impetus.
