Lagos — Gold rose 0.76% in yesterday’s trading session, supported by lower-than-expected inflation data and growing concerns about a potential global trade war. Investors are closely monitoring monetary policy signals as well as geopolitical tensions, leading to significant volatility in the precious metals market.
The latest U.S. Consumer Price Index (CPI) MoM (Feb) data showed a 0.2% increase in February, significantly lower than the previous month’s 0.5% rise. Both Core CPI MoM (Feb) and CPI YoY (Feb) also came in below expectations. This reflects easing inflationary pressures, increasing expectations that the Federal Reserve (Fed) may adopt a more dovish monetary policy stance. If inflation continues to slow, the Fed could pause or even cut interest rates in the near future, which would provide positive momentum for gold.
Beyond inflation, the market is also being significantly affected by escalating tensions in U.S. trade policy. The Washington administration has announced a 25% tariff on all imported steel and aluminum products, extending to hundreds of manufactured goods made from these metals. In response, Canada and the European Union immediately implemented retaliatory tariffs, heightening fears of a full-scale trade war.
Prolonged trade tensions could negatively impact global economic growth prospects, prompting investors to seek gold as a safe-haven asset. Historically, during periods of economic and trade uncertainty, gold has been a preferred choice for investors looking to preserve their wealth against currency depreciation.
In addition to economic factors, markets are also closely watching geopolitical developments, particularly the ongoing conflict between Russia and Ukraine. Recently, Russia laid out a series of demands for the U.S. to facilitate peace negotiations, including:
– Ukraine not joining NATO.
– No deployment of foreign military forces on Ukrainian territory.
– Recognition of Crimea and four other regions as part of Russia.
However, it remains uncertain whether an agreement will be reached, as the U.S. awaits Ukraine’s response. This continued uncertainty is adding to investor unease.
In the short term, both economic and geopolitical factors are providing strong support for gold prices, potentially allowing the precious metal to maintain its upward momentum. Investors are now awaiting further signals from the Fed, as well as responses from major economies regarding trade tensions, to determine the next direction of the gold market.
* Linh Tran, Market Analyst at XS.com
