Last week saw prices finally storm past the $3,000 per ounce mark, a historic milestone achieved on Friday before retreating slightly as traders banked profits at this psychological level. The precious metal was trading near this level on Monday, threatening to push further higher as the weakened.
Demand for the safe-haven metal has remained strong so far this year, fuelled by the ongoing economic unease sparked by President Trump’s escalating tariff war. The spotlight remains on the deepening trade tensions between the US and its global counterparts as market participants scour for cues on what’s to come.
Meanwhile, rate decisions from three major central banks loom large this week. Should any of them lean more dovish than markets anticipate, it could further bolster bullish sentiment around gold prices.
Conversely, a breakthrough in US-China trade talks or notable progress in negotiations between Russia and Ukraine may sap some of gold’s safe-haven appeal, coaxing investors back into riskier assets like equities – especially in light of Friday’s bullish reversal on major US indices and technology stocks.
Why Has Gold Risen So Much?
Well, gold has been climbing for a variety of reasons, with safe-haven demand playing a major role over the years. From the COVID-19 uncertainty in 2020 to the Russia-Ukraine conflict, surging global inflation from 2022 onward, tensions in the Middle East, and now the growing fears of a trade war sparked by Trump’s protectionist stance — all have contributed to gold’s appeal.
In times of economic instability and market stress, investors typically flock to gold as their go-to haven. Since Trump entered office, global trade dynamics have been thrown into turmoil. His unpredictable and aggressive tariff strategy eventually halted US market momentum, triggering a selloff that began in late February and deepened into early March.
Retaliatory actions from trading partners have only added to the uncertainty. Gold’s consistent rally to new highs throughout this period reflects investors’ lack of confidence in those steering the world’s largest economy.
Weakening Also Helping Gold Prices
It’s not just trade war jitters lifting gold prices. A flagging US dollar, weighed down by underwhelming economic data, has also lent support. Should this trend continue, gold could well remain on the front foot. Today’s focus will be on for February, with expected to come in at +0.6% m/m and core sales at +0.3% m/m.
Last week, softer-than-expected CPI and PPI prints pressured the greenback further. Then came Friday’s disappointing University of Michigan consumer sentiment survey, which fell to 57.9 from 64.7, missing forecasts of 63.1.
This marks the third consecutive month of declines in consumer confidence, likely driven by growing anxieties over Trump’s trade manoeuvres and their drag on economic optimism. Of particular note was the sharp rise in inflation expectations—jumping from last month’s 4.3% to a hefty 4.9% in March. This suggests that, despite easing headline inflation figures, price pressures are bubbling beneath the surface.
Big Central Bank Decisions Could Swing Gold Prices Further
This week’s trifecta of central bank decisions will be pivotal for gold prices. While significant policy shifts are not a given, any dovish surprises could add further shine to bullion’s allure.
The Bank of Japan is under the microscope, as buoyant wage growth and stubborn inflation raise expectations of tighter policy ahead. Eyes will be firmly fixed on the March 19 meeting for hints of what’s next. A recent Bloomberg poll indicates most economists expect a hike between June and September, though a growing minority now see May as a live possibility.
Over in Washington, the Federal Reserve is tipped to keep rates steady on March 19. Yet, should Jerome Powell and company signal a tilt towards cuts sooner than expected, the dollar could weaken, underpinning gold prices. Traders will dissect every line of the Fed’s policy statement, economic projections, and Powell’s press conference for clues.
And the Bank of England is anticipated to hold rates at 4.5% when it meets on March 20, despite sticky inflation. Markets, however, are increasingly betting on cuts later this year, with a 77% probability priced in for May and 55% for August. Whether these expectations hold water remains to be seen, especially with UK inflation having ticked up to 3.0% in January.
Gold Technical Analysis and Trade Ideas
Technically, the narrative remains bullish for gold prices. As long as gold sustains its higher highs and higher lows pattern, the path of least resistance points upwards. The key support zone now resides between $2,929 and $2,956, an area that once acted as resistance. The ascending trendline from January is another critical marker—should prices breach this, particularly below $2,880, the bullish bias could flip, paving the way for a deeper correction.
On the upside, $3,000 is a big level. Although gold’s price action suggests we could see further gains, I wouldn’t rule out the possibility for gold to struggle here for a while amid profit-taking with the RSI and other momentum indicators back at or near overbought levels again.
But if do see a decisive break above the $3K mark, then the next Fibonacci-based targets are at $3,032 (marking the 161.8% extension of the mini-downswing from mid-February) followed by $3043 (which corresponds with the 200% extension level of the last significant downswing between October and November).
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Disclaimer: This article is written for informational purposes only; it does not constitute a solicitation, offer, advice, counsel or recommendation to invest as such it is not intended to incentivize the purchase of assets in any way. I would like to remind you that any type of asset, is evaluated from multiple perspectives and is highly risky and therefore, any investment decision and the associated risk remains with the investor.
