Gold (XAU/USD) extends its intraday rally, reaching the $2,880 region during the Asian session on Monday. The gains come in response to US President Donald Trump’s plan to impose new 25% tariffs on all steel and aluminum imports, reigniting fears of a global trade war and driving demand for the safe-haven precious metal. Additionally, concerns that Trump’s protectionist policies could fuel inflation further bolster gold’s appeal as a hedge against rising prices.
Gold Supported by Trade War Fears, But Fed Policy Remains a Concern
Despite strong upside momentum, gold’s gains may face limitations due to the resilient US Dollar (USD) and expectations that the Federal Reserve (Fed) might delay further rate cuts. The strong US employment data released on Friday, coupled with inflationary concerns, has reinforced speculation that the Fed will maintain a cautious stance.
Overbought conditions on the daily chart could also deter traders from initiating fresh bullish positions, especially in the absence of key US economic data early in the week.
Trump’s Tariff Announcement Sparks Market Uncertainty
On Sunday, Trump reaffirmed plans to impose 25% tariffs on all steel and aluminum imports into the US, adding that his administration would match tariff rates imposed by other countries. These announcements have further fueled uncertainty and strengthened gold’s safe-haven appeal.
Meanwhile, geopolitical tensions remain elevated. Russian Deputy Foreign Minister Galuzin stated there are no satisfactory proposals for Ukraine peace talks, dismissing Western statements as mere rhetoric. US Vice President JD Vance is reportedly heading to Germany this week to outline US policy proposals.
Fed Policymakers Express Caution Amid Economic Uncertainty
The latest US Nonfarm Payrolls (NFP) report showed 143K jobs were added in January, falling short of the 170K estimate but offset by an unexpected dip in the Unemployment Rate to 4.0%. While the report provides mixed signals, it has reinforced the belief that the Fed will remain cautious regarding further monetary easing.
Several Fed officials have weighed in on economic policy:
- Minneapolis Fed President Neel Kashkari stated he would consider supporting further rate cuts if inflation data remains favorable and the labor market stays strong.
- Chicago Fed President Austan Goolsbee noted that inconsistent US government policies create economic uncertainty, making it difficult to assess inflation trends.
- Fed Governor Adriana Kugler acknowledged steady US economic growth but warned that progress toward the 2% inflation target remains uneven and slow.
What’s Next for Gold?
A stronger US Dollar could act as a headwind for gold prices, limiting aggressive bullish momentum. Traders will closely monitor Fed Chair Jerome Powell’s semi-annual congressional testimony and the upcoming US consumer inflation figures for further market direction.
