Gold prices rallied sharply higher in New York trading today, recapturing Friday's losses and pushed beyond the $2,900 mark as the U.S. dollar faced significant pressure. The precious metal's gains come amid increasing safe-haven demand triggered by both economic concerns and escalating geopolitical tensions.
As of 4:30 PM EST, the most active April gold futures contract settled at $2,905.90, registering an impressive gain of $38.60 or 1.35% for the session.
Dollar Weakness Drives Gold Higher
The dollar index declined by 0.86% to 106.585, providing substantial support for gold's upward movement. This weakness stems primarily from Eurodollar strength, which carries the heaviest weighting (57.6%) in the dollar index that also includes the Japanese Yen (13.6%), British Sterling (11.9%), Canadian dollar (9.1%), Swedish Krona (4.2%), and Swiss franc (3.6%).
Enhanced yields on European government bonds following positive economic news in the eurozone contributed to the dollar's decline. Additionally, weaker-than-expected U.S. economic data put further pressure on the greenback.
U.S. Economic Data Disappoints
The February ISM manufacturing index fell 0.6 points to 50.3, falling short of expectations of 50.7. Meanwhile, the February ISM prices paid sub-index rose 7.5 points to a 2-1/2 year high of 62.4, significantly stronger than the expected 56.0, signaling potential inflationary pressures in the manufacturing sector.
Impending Tariffs Fuel Market Anxiety
Market participants are now keenly focused on tomorrow's implementation of U.S. tariffs on Canadian and Mexican imports. According to MT Newswires, "Trump has promised to impose 25% tariffs on imports from Canada and Mexico beginning on Tuesday, along with a 10% levy on energy imports from Canada, which supplies about 20% of U.S. oil demand. The president is also raising the tariff on imports from China to 20% from 10%."
Both Canada and Mexico have announced plans for retaliatory tariffs on American imports, raising concerns about a potential large-scale trade war that could boost inflation while simultaneously slowing economic growth across North America.
Geopolitical Tensions Add to Safe-Haven Appeal
Gold's gains were further fueled by growing geopolitical concerns following a contentious Oval Office meeting between Ukrainian President Volodymyr Zelensky, President Trump, and Vice President JD Vance. The meeting reportedly ended in a shouting match, with reports suggesting the U.S. officials bullied the Ukrainian president. Some political analysts have expressed concerns that this confrontation could signal a shift in U.S. foreign policy, potentially abandoning support for a democratic ally in favor of improved relations with Russia.
Looking Ahead
Investors now await Friday's February nonfarm payroll report, which is expected to show an addition of 160,000 new jobs, while the unemployment rate is forecast to remain steady at 4.0%.
With fears mounting that Trump's tariff plans could ignite inflation while contracting economic growth—potentially leading to stagflation—gold's traditional role as an inflation hedge and safe-haven asset continues to strengthen its appeal among investors navigating these uncertain waters.
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