Gold prices surged more than 1% on Monday, reversing two days of losses as the US Dollar (USD) weakened, driven by safe-haven demand and declining US Treasury bond yields. The rally in gold (XAU/USD) comes as investors flock to the precious metal amid rising geopolitical tensions and tariff threats from US President Donald Trump, with gold trading around $2,888.
The market’s risk sentiment soured following a tense exchange between US President Donald Trump and Ukrainian President Volodymyr Zelenskyy last Friday. This clash, along with the anticipation of tariffs on Mexico, Canada, and China set to take effect on Tuesday, has further heightened investor anxiety, driving a shift towards gold as a secure investment.
On the economic front, business activity in the US manufacturing sector showed mixed signals in February. While the S&P Global Manufacturing PMI improved, the ISM Manufacturing PMI dipped but continued to show expansion, reflecting underlying growth in the sector. At the same time, the latest US economic data sent the Atlanta GDP Now Q1 2025 forecast deeper into negative territory, lowering the forecast from -1.6% on February 28 to -2.8% at the time of writing.
The deteriorating outlook has prompted traders to seek the safety of gold, propelling its price toward the $2,900 mark. Meanwhile, the yield on the US 10-year Treasury note fell by two basis points to 4.176%, marking the lowest levels since December 2024.
In line with this uncertainty, St. Louis Federal Reserve President Alberto Musalem acknowledged the potential risks to the economic outlook, despite ongoing expectations for solid growth. The combination of geopolitical tensions, tariff threats, and disappointing economic data has reinforced the appeal of gold as a store of value.
Technical Outlook: Gold Eyes $2,900 as Bullish Momentum Continues
Gold’s uptrend resumed after a brief pullback that saw XAU/USD dip below the $2,900 level. However, support near $2,830 triggered a rebound, pushing gold prices above $2,850 and intensifying the rally toward $2,893. Should gold manage a daily close above $2,900, it could target its year-to-date (YTD) high of $2,954.
On the downside, should the rally falter, XAU/USD may revisit the February 14 low of $2,877, followed by the February 12 swing low of $2,864. However, the broader bullish trend remains intact unless gold falls below the critical support level of $2,800.
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