[MACRO Trends] The ever-changing gold market, short-term pullbacks and long-term support factors

 

Gold prices fell to their lowest level in two weeks on Thursday as the dollar strengthened and investors awaited key inflation data for clues on the Federal Reserve's monetary policy. It fell nearly $13 in the short term at the beginning of the U.S. trading session, falling below $2,870 an ounce, and fell more than 1.60% during the day. On Friday, it hit a new low of below $2,860 an ounce. The U.S. dollar index rose more than 0.5% to above 107, further away from its recent 11-week low, making dollar-denominated gold more expensive for holders of other currencies. The 10-year U.S. Treasury yield rose by more than 1% at one point, weakening the relative appeal of non-interest-bearing gold.

U.S. President Trump's statement on tariff policy further exacerbated market uncertainty. He said on social media that new tariffs on Mexico and Canada will take effect on March 4, and he had previously proposed a 25% tariff on European cars and other goods. The uncertainty prompted investors to flock to the U.S. dollar, further pressuring gold, which was already under pressure from profit-taking after hitting an all-time high. Spot gold hit an all-time high of $2,956.15 an ounce on Monday on safe-haven inflows. However, a pullback in gold this week would end its eight-week winning streak, its longest such streak since 2020.

 

Investors were also looking for clues on U.S. monetary policy, with several officials due to speak later, while the personal consumption expenditures (PCE) index is due on Friday. U.S. bond investors expect the Fed to shift its focus from inflation to economic growth. The market expects the Federal Reserve to cut interest rates at least twice this year, with a cut of about 55 basis points expected in 2025. Any significant changes in these (interest rate) expectations could lead to increased volatility in gold. Geopolitical risks and Trump's tariff policy may keep gold bulls active.

From a technical perspective, if gold fails to hold the $2,878 area and the $2,860-2,855 area, the price of gold may further accelerate its corrective decline to the $2,834 area and all the way down to the $2,800 round number. On the other hand, a break above the immediate barrier of $2,920 could attract sellers near the overnight high, around the $2,930 area. If gold prices can move firmly upward, they could move further towards the 2950-2955 resistance level or the record high hit on the first day of this week. Central banks around the world have been buying large amounts of gold in recent years, pushing prices of the precious metal to record levels.

 

Despite the current pullback, gold prices could soon break through $3,000 amid ongoing geopolitical tensions and concerns about inflation and trade. Since 2025, gold futures prices have risen by more than 9% at one point, outperforming the S&P 500 index. Earlier this month, gold prices broke through $2,900, a record high. The central bank has been a net buyer of gold for 15 consecutive years, and its purchases began to increase significantly after the outbreak of the Russia-Ukraine conflict. Central banks purchased a record 1,082 tonnes of gold in 2022, according to the World Gold Council. In 2024 they added more than 1,000 tonnes of gold for the third consecutive year, about twice the pace of purchases before the conflict broke out.

Gold is widely viewed as a safe-haven asset in times of uncertainty. In recent years, various geopolitical events have continued to occur around the world - including the conflict in Ukraine, the Gaza War and the regional banking crisis in the United States. Concerns about continued inflation and global tensions remain, and concerns supporting the rise in gold prices are not expected to disappear soon. Other growing threats, such as a ballooning U.S. deficit and protectionist rhetoric around tariffs, have also left central banks around the world searching for alternatives. But what alternatives are there to gold? How should I respond to my own situation and the global situation? There are many reasons why gold prices have hit record highs. But one major driver of gold demand lately – central bank buying – shows no signs of slowing down!

 

Concerns about U.S. policies, such as tariffs threatened by President Donald Trump and ballooning federal deficits, have led central banks to seek alternatives to the dollar or U.S. Treasuries. Among them, gold is widely recognized and is not subject to credit or other counterparty constraints, making it an important reserve asset. UBS this week raised its 2025 gold price forecast to an average of $2,900, with the potential to peak at $3,200 and end the year above $3,000.

Gold prices have seen a certain degree of correction recently, mainly affected by the strengthening of the US dollar and the market's wait for key inflation data. However, in the long term, factors such as continued purchases by global central banks, geopolitical tensions, and inflation and trade concerns will continue to support gold prices. Investors should pay close attention to market developments, especially the Federal Reserve's monetary policy and geopolitical events, to formulate reasonable investment strategies.