Gold prices have dropped nearly 3% from Monday’s all-time high as renewed tariff commitments from U.S. President Donald Trump triggered broad market sell-offs. Trump reaffirmed overnight that tariffs on Mexico and Canada will take effect on March 4, while imports from China will face an additional 10% duty, bringing the total tariff rate to 20%. The news has rattled markets, prompting investors to liquidate equities, cryptocurrencies, and gold, despite a decline in U.S. bond yields.
Currently, gold (XAU/USD) is trading at $2,860, down from its Monday peak of $2,956. Initially perceived as a safe-haven asset during economic uncertainty, gold has struggled to maintain its strength amid fears of a protracted trade war. The Chinese government has vowed to retaliate, with a Ministry of Commerce spokesperson stating, “If the U.S. insists on having its own way, China will counter with all necessary measures to defend its legitimate rights and interests.”
Market Sentiment and ETF Activity
Gold Exchange Traded Funds (ETFs) in China have seen significant inflows this year as investors seek alternative assets amid market volatility. Onshore gold fund holdings have surged by 17.7 tons in the first three weeks of February, nearing the monthly record of 20.9 tons set last October, according to data from the World Gold Council. Meanwhile, global indices remain under pressure, with Asian markets posting steep losses and European indices down over 1% intraday.
The CME FedWatch Tool indicates growing expectations for a Federal Reserve rate cut in June, with odds rising to 71.8%, compared to a 28.1% likelihood of rates remaining unchanged.
Technical Outlook: Buying Opportunities Ahead?
Despite the recent decline, gold’s fundamentals remain strong, with ongoing tariff concerns likely to support future rallies. Key support levels include $2,790 and $2,800, where buying interest is expected. On the upside, resistance is seen at $2,888 and $2,900, with stronger barriers at $2,909 and $2,941. While recovery to these higher levels appears challenging in the short term, traders may look for opportunities to re-enter the market at key support zones.
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