Gold prices jumped to historic peaks during the Asian session on Friday, breaching $3,070 just after midnight ET. That market uncertainty has increased even further after former President Donald Trump’s pronouncements of retaliatory tariffs. These recent moves by both sides have driven up pessimism over a Sino-U.S. trade war and the risk of stagflation. Indeed, the prevailing risk-off sentiment has continued to pervade market movements. This, in turn, has made investors rush to the safe-haven asset further boosting the latter’s value. Traders are nervously looking forward to the release of the US Personal Consumption Expenditures (PCE) Price Index data. This could set the stage for new innovations and movements in the gold market.
Safe-Haven Surge Amid Trade War Fears
The second claim to fame has happened in recent weeks, as gold has shot straight up with astounding momentum. It’s now headed for a record-setting $3,100 after closing above $3,050 on Thursday. Trade tensions are on the rise with Trump’s new tariff escapades. This revival has exacerbated investor nerves over the potential for a world-wide economic slowdown or stagflation. These new concerns have driven up demand for gold, traditionally a safe haven asset in times of economic uncertainty.
This risk-off mood has been exacerbated by recent data showing a frightfully strong American economy. While there are positive signs to be seen, these are being dimmed by fears related to tariffs. Consequently, the US Dollar (USD) and US Treasury bond yields have fallen in tandem. That volatile environment has continued to drive gold prices to historic highs as investors turn to gold as a haven from volatility seen in other asset classes.
Awaiting Key Economic Indicators
Market participants are keenly awaiting the US PCE Price Index data release, which is expected to play a crucial role in shaping gold’s future trajectory. Economists predict a 2.7% year-over-year jump in February for the Fed’s favored inflation measure. This follows a 2.6% increase in January. A hotter-than-expected reading would likely further fan the central bank’s dovish tilt on interest rate changes. That would be bad news for gold, since it pays no interest.
Gold’s 14-day Relative Strength Index (RSI) just hit an overbought extreme at 72.50. Despite this surge, the immediate trend looks rooted for a retracement soon. It will be no surprise if traders start taking profits quickly as they re-set for next week’s tariff goings-into-effect. The surprise Beat, scheduled to be released this Friday, US Nonfarm Payrolls (NFP), further contributes to the subsiding speculation.
Future Prospects and Market Sentiment
Those releases of data will certainly be key in deciding whether gold can continue its climb, or if a correction is in order. A surprise to the upside in core PCE Price Index data could increase the market’s confidence in two rate cuts as anticipated this year by the Federal Reserve. This would likely increase the attractiveness of gold as an investment alternative.
With a string of recent positive economic indicators, the US economy is still going strong. The specter of a new trade war is threatening to overshadow the bright future growth prospects. This uncertainty will continue to drive demand for gold as a hedge against economic and geopolitical instability.