Gold Price Forecast: XAU/USD holds positive ground near $3,000 on safe-haven demand

Gold price gains traction to around $2,985 in Monday’s early Asian session.
Economic uncertainty, Trump's tariff war and geopolitical risks underpin the Gold price.
The US envoy said he expected Trump to speak with Putin this week.

Lallalit Srijandorn FXStreet

Gold price (XAU/USD) remains strong near $2,985 after retracing from an all-time high of $3,005 during the early Asian session on Monday. The softer US Dollar (USD) and economic uncertainty over the impact of a global trade war provide some support to the precious metal. Traders await the US February Retail Sales data, which is due later on Monday.

The escalating trade war between the US and many of its major trading partners has rattled financial markets and prompted fears about the impact on economies across the world. On Thursday, US President Donald Trump threatened to impose a 200% tariff on wine, cognac and other alcohol imports from Europe.

This measure came in response to the EU plan to impose tariffs on American whiskey and other products in April, which itself is a reaction to Trump's 25% duties on steel and aluminum imports that took effect on Wednesday.

Additionally, the softer Greenback after the weaker-than-expected US economic data contributes to the Gold’s upside. The preliminary reading of the University of Michigan (UoM) Consumer Sentiment Index showed that the index reached its lowest since November 2022, falling to 57.9 from 64.7 in the previous reading. This reading came in below the market consensus of 63.1.

The Houthis stated on Sunday that they launched an attack on the USS Harry S Truman aircraft carrier and its supporting vessels in the northern Red Sea, using 18 ballistic and cruise missiles as well as drones. "In a backdrop of geopolitical uncertainty and ongoing tariff changes, appetite for gold remains strong," said Suki Cooper, a precious metals analyst at Standard Chartered.

However, any positive developments or easing fears of Russia and Ukraine conflicts might drag the Gold price lower. Last week, the United States and Ukraine decided to propose a 30-day ceasefire to Russia. Trump’s envoy Steve Witkoff said on Sunday that he expected Trump to speak with Russian President Vladimir Putin this week, saying that Putin “accepts the philosophy” of Trump’s ceasefire and peace terms.

Gold FAQs

Why do people invest in Gold?

Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.

Who buys the most Gold?

Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.

How is Gold correlated with other assets?

Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.

What does the price of Gold depend on?

The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.

Author

Lallalit Srijandorn

FXStreet

Lallalit Srijandorn is a Parisian at heart. She has lived in France since 2019 and now becomes a digital entrepreneur based in Paris and Bangkok.

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