Gold prices dipped on Tuesday as market participants exercised caution, preparing for U.S. President Donald Trump’s tariffs on Canada, Mexico, and China to take effect imminently. Spot gold fell 0.3 percent to $2,885.40 an ounce at 03:00 GMT, while U.S. gold futures decreased by 0.2 percent to $2,895.40.
In the UAE, gold rates saw an increase, with 24-carat rising AED2.5 to AED348.25 and 22-carat gold prices rising AED2.25 to AED324. Additionally, 21-carat gold rose AED2.25 to AED310.75 and 18-carat gold rose by AED1.75 to AED266.25.
On Monday, Trump announced that 25 percent tariffs on goods from Mexico and Canada would begin on Tuesday, alongside a doubling of tariffs on Chinese goods to 20 percent. This announcement has stoked fears of a trade war in North America, causing financial markets to react negatively. Additionally, Trump indicated that reciprocal tariffs would be enacted on April 2 for countries imposing duties on U.S. products.
Commenting on this, Ole Hansen, head of commodity strategy, Saxo Bank, told Economy Middle East, “Weeks of strong performances finally triggered some profit-taking and reduced positioning across precious and industrial metals, as well as platinum-group metals. However, while the reductions seen in gold and silver were primarily driven by long liquidation with limited short-selling interest, the 59% reduction in the platinum long was driven by both long liquidation and increased short-seller participation. Copper’s week-long buying streak also paused as prices retraced lower, leading to a one-third reduction in the net long.”
Tariffs and inflation impact
Many view Trump’s tariff plans as inflationary, resulting in increased safe-haven flows into bullion, which has risen approximately 10 percent this year. However, persistent high inflation may compel the Federal Reserve to maintain elevated rates for an extended period, which could diminish the appeal of non-yielding gold.
The market is currently awaiting the ADP employment report due Wednesday and the U.S. non-farm payrolls report scheduled for Friday, which could provide further insights into the Fed’s rate trajectory. JPMorgan expressed a long-term structural bullish outlook for gold, projecting a price target close to $3,000 per ounce by the fourth quarter of 2025.
Spot silver declined by 0.6 percent to $31.5 an ounce, platinum fell 0.3 percent to $950.63, and palladium slipped 1.1 percent to $927.46.
Gold prices rise amid dollar weakness and geopolitical uncertainty
Gold prices increased on Monday as the U.S. dollar weakened and uncertainty surrounding a peace deal in Ukraine heightened. Market concerns regarding U.S. President Donald Trump’s tariff policies further bolstered gold’s appeal as a safe haven.
In the UAE, gold rates saw a slight increase, with 24-carat and 22-carat gold prices reaching AED345.5 and AED321.50, respectively, marking a rise of AED0.5 on Monday. Additionally, 21-carat gold and 18-carat gold rose by AED0.5 to AED308.25 and AED264.25, respectively. The U.S. dollar index fell 0.33 percent from over a two-week high, making bullion less expensive for holders of other currencies.
Read more: UAE gold prices rise AED0.5, global rates gain on Ukraine peace deal uncertainty
Geopolitical risks support bullion’s safe-haven demand
Gold prices continue to be supported by geopolitical risk factors due to delays in the anticipated peace agreement between Ukraine and Russia. The meeting between Ukrainian President Volodymyr Zelenskiy and U.S. President Donald Trump concluded negatively on Friday, adding further uncertainty to financial markets already affected by weaker economic data and ambiguity surrounding U.S. trade policies.
Amid concerns that Trump’s trade tariffs could undermine consumer spending and economic growth, safe-haven demand for gold has surged. U.S. Commerce Secretary Howard Lutnick indicated on Sunday that tariffs on Canada and Mexico would take effect on Tuesday, but the final decision on maintaining the 25 percent level rests with Trump.
Additionally, Trump announced a new 10 percent tariff on Chinese goods, effectively doubling the 10 percent duties imposed earlier on February 4.
U.S. consumer spending unexpectedly falls
Recent data revealed that U.S. consumer spending unexpectedly declined in January. The U.S. Bureau of Economic Analysis reported a 0.3 percent increase in the Personal Consumption Expenditures (PCE) Price Index for January, which has risen 2.5 percent over the past year, slightly down from 2.6 percent in December.
The report also indicated that U.S. consumer spending fell by 0.2 percent last month, marking the first decrease since March 2023 and the largest drop in nearly four years, raising concerns about the U.S. growth outlook. According to the CME FedWatch tool, traders are anticipating that the Federal Reserve may resume cutting interest rates during the June policy meeting, with further cuts expected in September. Although bullion is often considered a hedge against geopolitical uncertainty, its attractiveness diminishes in a high interest-rate environment.
