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Last week, XAU/USD settled at $2984.91, up $75.36 or +2.59%.
Stock Market Volatility and Trade Uncertainty Drive Gold Buying
Gold’s rally was fueled by heightened concerns over U.S. trade policy. President Trump’s new tariff measures, particularly on Chinese imports, sparked fears of prolonged economic strain. Retaliatory tariffs from China and Canada added to market instability, sending equities lower and increasing demand for gold as a hedge.
The S&P 500 and Nasdaq saw deep losses earlier in the week, with $5 trillion erased from market value over three weeks. This risk-off move drove investors into gold, a trend reinforced by a Bank of America survey showing 52% of fund managers now view it as the best protection against a trade war.
Cooling Inflation Strengthens Rate Cut Bets
This week’s inflation reports supported expectations that the Fed may cut rates later this year. CPI data showed a 0.3% rise for February, with annual inflation at 2.9%. Core CPI slowed to 3.2%, while PPI came in softer than expected, signaling moderating price pressures.
Traders have priced in potential Fed easing by mid-year, though Fed Chair Jerome Powell has remained noncommittal. If inflation continues to decline, the case for rate cuts strengthens, which would be bullish for gold. However, if inflation stabilizes above target, the Fed could hold rates higher for longer, limiting gold’s upside.
Friday’s Equity Rebound Sparks Gold Profit-Taking
Gold retreated from its peak as equities staged a sharp recovery on Friday. The Dow gained 1.65%, while the S&P 500 climbed 2.13%, easing risk aversion. The lack of new tariff headlines and a rebound in tech stocks encouraged investors to move back into equities, triggering mild profit-taking in gold.
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