The US Dollar has experienced a significant decline, losing approximately 3% of its value against major currency rivals last week. This depreciation comes amid growing concerns over an economic slowdown. At the same time, gold prices have been testing support levels around the 21-day Simple Moving Average (SMA) of $2,911, with the Relative Strength Index (RSI) maintaining a bullish stance.
The US economy's latest employment data reveals that 151,000 jobs were added in February, falling short of expectations which forecasted an increase of 160,000. Furthermore, the unemployment rate has risen to 4.1%, surpassing the anticipated 4%. Despite these challenges, the market's attention remains focused on President Trump's impending tariffs and ongoing geopolitical tensions, which are influencing demand for safe-haven assets like the US Dollar.
China's recent inflation data has also impacted the currency markets, contributing to the Australian Dollar's struggles. Meanwhile, Chinese gold purchases continue unabated for the fourth consecutive month, providing ongoing support for gold prices. As February unfolds, consumer price inflation shows signs of cooling after a strong start in early 2025.
Gold Prices and Technical Indicators
Gold prices commenced the new week extending their range above $2,900. The market remains focused on defending a critical support line near $2,910. The Relative Strength Index (RSI) continues to stay above the 50 level, hinting that buyers are likely to maintain control in the near term. The short-term technical outlook for gold indicates stability as long as prices hold above the 21-day SMA of $2,911 on a daily closing basis.
The ongoing depreciation of the US Dollar, fueled by economic concerns stemming from tariff disputes and dwindling US Treasury yields, has further influenced gold's appeal. These factors collectively contribute to gold's steady position within its current trading range.
China's commitment to increasing its gold reserves has lent further support to the yellow metal. Data from the People's Bank of China confirms the continuation of gold purchases into February, marking the fourth consecutive month of such activity.
Economic Concerns and Geopolitical Tensions
President Trump's tariff threats have intensified economic concerns. On Friday, he issued a fresh warning regarding potential tariffs on Canadian lumber, indicating that these could be implemented imminently. Additionally, discussions about lifting an intelligence pause on Ukraine have drawn attention. President Trump commented on Ukraine's position in mineral deals and their stance on peace:
"Ukraine will sign the minerals deal, but I want them to want peace… they haven't shown it to the extent they should," – President Trump
These geopolitical developments have contributed to renewed demand for safe-haven assets like gold and the US Dollar. However, as tariff-related tensions continue to impact global trade dynamics, market participants remain cautious.
Despite these challenges, President Trump maintained optimism about the state of the US economy. He indicated that the central bank would approach monetary policy easing cautiously, emphasizing that the economy "continues to be in a good place."
Outlook for Gold and Currency Markets
The outlook for gold in the short term remains largely unchanged as long as it defends key technical levels. The ongoing geopolitical uncertainties and economic concerns are expected to sustain demand for safe-haven assets. However, market observers will closely monitor developments related to President Trump's tariff policies and any potential shifts in central bank policy.