Gold Sets a New All-Time High
The gold (XAU/USD) price rose by 0.57% on Monday. XAU/USD finished the day above the $3,000 milestone for the first time in history as investors continued to buy the bullion amid economic uncertainty. It was trading at $3032.29 with a gain of 0.87% at the time of writing on Tuesday.
XAU/USD has been in a strong bullish trend since mid-December 2024. Growing geopolitical and economic uncertainty, concerns over trade tariffs, the anticipation of potential shifts in Federal Reserve Fed monetary policy, and heightened US recession risks in the US have driven investors to safe-haven gold. Gold doesn’t provide any passive income, but it’s considered a hedge against macroeconomic and political uncertainty and tends to thrive in a low-interest environment.
"Should economic data continue to soften and the global tariff war escalates, gold will continue to benefit", analysts at Heraeus Metals wrote in a note.
The Fed will release its updated economic projections this week, providing insights into how the central bank perceives the economic uncertainty stemming from US President Donald Trump’s policies.
"I expect some consolidation in gold prices... Right now, the market is in a "wait-and-see" mode ahead of the Fed’s decision", said David Meger, director of metals trading at High Ridge Futures.
Meanwhile, the White House has confirmed that Donald Trump plans to speak with Russian President Vladimir Putin on Tuesday and discuss ending the war in Ukraine. XAU/USD may decline below $2,960 if tangible progress and peace prospects are reached.
XAU/USD rose during the Asian and early European trading sessions. Today, traders should monitor any developments around global trade tariffs and Russia-Ukraine peace talks. The key macroeconomic event is tomorrow’s interest rate decision by the Fed and FOMC Economic projections.
"Spot gold may climb to $3,040 per ounce, driven by a powerful wave", said Reuters analyst Wang Tao.
Euro Benefits From Weaker-than-Expected US Economic Data
The euro (EUR/USD) gained 0.39% against the US dollar (USD) on Monday. Still, it failed to break above the critically important 1.09300 level even as the lower-than-expected US Retail Sales report weakened the greenback.
US retail sales rose by less than expected in February, the US Census Bureau reported yesterday. Consumers cut their spending on non-essential items, revealing economic concerns related to trade tariffs and federal job cuts.
"This report should alleviate concerns that the economy already is shrinking, but the risk of much weaker growth, as consumers seek to rebuild a savings buffer in response to concerns about job security, now looks elevated", said Samuel Tombs, chief US economist at Pantheon Macroeconomics.
Meanwhile, US President Trump’s trade tariffs raised concerns about inflation, job losses, and reduced income, all threatening consumer spending. The administration’s federal workforce cuts are also expected to dampen spending further. Personal consumption drives the US economy, accounting for around 70% of the Gross Domestic Product (GDP). Thus, the Federal Reserve (Fed) may be more willing to cut rates to support economic growth and stabilize consumer confidence. US manufacturing data and business investment also show signs of slowing, prompting the Fed to carefully assess the economic landscape and adjust its policies accordingly.
Weaker US economic indicators have contributed to strong EUR/USD growth. According to Reuters, currency markets have shifted in recent months. Traders reevaluated their initial expectations that Trump’s economic policies would support the US dollar and weaken other currencies. The reassessment has prompted the greenback to retreat by 6% against the euro since mid-January.
"I think the market just called it wrong. They were leading on the tax cuts and deregulation to boost growth, at the same time creating a sort of risk-averse mood. Actually, the focus has been much more on the protectionism, sending people’s heads spinning", said Kyle Chapman, FX markets analyst at Ballinger Group in London.
EUR/USD remained relatively unchanged during the Asian and early European trading sessions. Traders should stay alert for new developments around global trade tariffs and peace negotiations between Russia and Ukraine. In addition, the German Zew Economic Sentiment report at 10:00 a.m. UTC today may add extra volatility to the market. Higher-than-expected figures may finally push EUR/USD above the critical 1.09300 level. Conversely, lower-than-expected numbers may trigger a pullback towards 1.08750.
Weaker US Dollar Pushes Canadian Dollar Higher
The Canadian dollar (USD/CAD) gained 0.57% against the US dollar (USD) on Monday as the greenback weakened amid concerns about possible US economic recession.
There are ’no guarantees’ there won’t be a recession in the US, although there could be an adjustment, Treasury Secretary Scott Bessent said in an interview. The recent decline in US stocks made investors increasingly anxious about potential economic headwinds and the long-term stability of their US dollar-denominated portfolios. Uncertainties arising from US President Donald Trump’s policies, including tariff threats against the biggest US trading partners, are prompting investors to sell the greenback.
Yesterday, the US Retail Sales report showed only a modest rebound in sales in February after a revised 1.2% decline in January, further damaging the US dollar. The market is now pricing in about 60 basis points (bps) worth of cuts by the Federal Reserve (Fed) this year. At the same time, interest rate swaps market data imply a 34% chance of 50 bps worth of rate cuts by the Bank of Canada (BoC) over the same period. While a broader trend in USD/CAD remains bullish, the bears are gaining momentum, showing increasing signs of strength and potentially signaling a shift in the short-term direction.
USD/CAD rose during the Asian and early European trading sessions. Today, the market focuses on the Canadian Consumer Price Index (CPI) report at 12:30 p.m. UTC. The market expects a 0.6% rise in monthly headline inflation and a 2.2% annual increase. Higher-than-expected figures will likely push USD/CAD below 1.42400. Conversely, lower-than-expected results may pull the pair above 1.43500.