Written by Linh Tran, Market Analyst at XS.com
Gold made an impressive recovery for the second consecutive session, reclaiming the psychological level of $2,900/oz yesterday as geopolitical risk concerns resurfaced and trade tensions continued to escalate.
Geopolitical tensions have intensified as U.S. and Ukrainian leaders issued strong statements. After U.S. President Donald Trump announced a temporary suspension of aid to Ukraine, Ukrainian Prime Minister Denys Shmyhal stated that the country’s forces could maintain stability on the battlefield as they fight Russian troops, despite the pause in U.S. support.
These remarks indicate that the conflict is likely to persist, at least in the short term. Renewed geopolitical risks have created an ideal environment for safe-haven assets, with gold being a primary beneficiary.
Furthermore, in the trade sector, following the U.S. announcement of additional tariffs on Chinese imports, raising the total tariff rate to 20%, China declared its own retaliatory measures yesterday.
The Chinese Ministry of Foreign Affairs asserted that if the U.S. insists on pursuing a trade war or imposing tariffs, China will retaliate to the end. The country has announced tariff increases from 10% to 15% on various U.S. agricultural and food products while expanding its trade blacklist by adding 25 American companies, citing national security concerns.
The aggressive tariff policies of both the U.S. and China have heightened the risk of a full-scale trade war between the world’s two largest economies, thereby driving up gold prices as a hedge against economic instability.
At the same time, the weakening U.S. dollar, driven by concerns over the economic outlook amid rising trade and geopolitical tensions, has further boosted the appeal of the precious metal.
For the remainder of this trading week, investors’ focus will be on U.S. employment data and the Non-Farm Payroll (NFP) report. If the released figures do not bring negative surprises, it may signal the first signs of optimism for the economy. Conversely, weaker-than-expected data will further fuel the current trend of safe-haven demand.