Gold prices rose more than 1% on Monday after US President Donald Trump said it was too late to avoid tariffs on China, Mexico and Canada. Canada is expected to impose retaliatory tariffs of 25% starting Tuesday. While China will impose a 15% tariff on US agricultural goods starting March 10.
US Treasury yields fell again on Tuesday, hitting a five-month low of 4.11%. In contrast, gold (XAU/USD) was slightly higher at around $2,910 at the time of writing on Tuesday, after rising 1% the previous day. The rally was driven by President Trump’s confirmation that he would go ahead with tariffs on Canada. Mexico and China, which has given markets confidence that the tariffs will go into effect. There were doubts on Monday about whether Trump would allow an extension of the tariffs based on the efforts of these countries to meet the US administration’s demands, but it appears that time has passed.
On the other hand, Canada and China have already rejected the imposition of unilateral tariffs by the United States. Canadian Prime Minister Justin Trudeau’s office confirmed that Canada will impose retaliatory tariffs on US imports starting Tuesday if the US tariffs go into effect. “Canada will begin imposing 25% tariffs on US imports worth C$30 billion starting Tuesday,” the statement said, adding that tariffs on another C$125 billion worth of products will go into effect in 21 days.
If investors want to avoid another decline in gold prices, this level should hold. In case of a further decline, the price could head towards the S2 support at $2,842, which is expected to absorb any additional downside pressure.
Daily Market Movers: Safe Haven Demand
On the geopolitical front, a US defense official said the US has suspended all military aid to Ukraine. According to Bloomberg.
In another context, there is a greater trend in the market for a rate cut by the Federal Reserve by June. As the odds showed that there is an 85.6% chance of a rate cut. While the chance of keeping the rate unchanged is 14.4%. A series of recent US data showing rising inflation and slowing economic activity indicate that the world’s largest economy may be entering a phase of inflationary stagnation. Which is raising concerns in the markets.
Technical Analysis: The Road Ahead is Long
Gold extended its gains from Monday at the beginning of the European trading session on Tuesday. The ranges became narrower for the daily pivot point levels, reflecting hesitation among investors after its decline last week. The anticipation regarding the direction of gold is expected to continue in light of the uncertainty resulting from the mutual trade war. Which supports the rise in gold prices.
Technical support and resistance levels indicate the possibility of large movements in the price of gold. The daily pivot point at $2,879 and the resistance level R1 at $2,903 provide support for the rebound. Indicating the possibility of pushing prices higher. In case of a strong price increase, the daily R2 resistance at $2,917 could be reached. Which is likely to be the daily high before reaching the all-time high of $2,956, which was reached on February 24. On the downside, the S1 support at $2,866 is important, and it coincides with the low seen last Thursday.
Gold stabilizes as Trump’s tariffs on Mexico and Canada go into effect
In a surprise move to global markets. The administration of US President Donald Trump imposed 25% tariffs on imports from Mexico and Canada, as part of its efforts to combat illegal immigration and drug smuggling. The tariffs went into effect on Tuesday, causing volatility in global financial markets. Earlier on Monday, Trump also signed an order to increase tariffs on Chinese goods by 20%. Up from just 10% earlier in February. Despite these economic moves. Gold prices have stabilized significantly, maintaining their appeal as a safe haven for investors in these uncertain economic conditions. Other precious metals, such as platinum and silver, were also affected by the market volatility. With platinum futures down 0.1% to $969.20 an ounce. While silver futures fell 0.2% to $32.269 an ounce.
The impact of the tariffs was evident in global equity markets. With major indices such as Japan’s Nikkei 225 and Hong Kong’s Hang Seng posting significant losses. In the US, the Dow Jones Industrial Average fell 1.5%. The Nasdaq Composite dropped 2.6%, and the S&P 500 fell 1.8%.
Despite these declines in equity markets, gold prices continued to hold steady. Reflecting the increasing appeal of the precious metal as an investment vehicle in times of crisis. The main reason for this trend is that gold is considered one of the most important assets that investors try to preserve its value amid international economic and financial tensions.
These developments show that gold remains a key element in investors’ hedging strategies at a time of heightened market volatility. While trade wars may continue to impact financial markets. Gold remains an asset that many investors seek to maintain in their portfolios.
