Gold prices remain robust near $2,985 after a slight pullback from a record high of $3,005. A weakened US Dollar and concerns over a global trade war provide support for the precious metal as traders await US February Retail Sales data.

The escalating trade tensions, particularly between the US and Europe, have increased market volatility. President Trump’s recent tariff threats further raise apprehensions about economic impacts from these conflicts.

Softer US economic indicators, like the University of Michigan Consumer Sentiment Index dropping to 57.9, contribute to gold’s upward trend.

Geopolitical uncertainties, such as conflicts involving the Houthis and broader tensions in Russia and Ukraine, have also bolstered demand for gold. A proposed ceasefire by the US and Ukraine may influence prices if successful.

Gold serves as a historical store of value and is increasingly viewed as a safe-haven asset. Central banks, diversifying reserves amidst economic uncertainty, added 1,136 tonnes of gold valued at approximately $70 billion in 2022, marking the highest yearly purchases on record.

The inverse relationship between gold and the US Dollar suggests that a depreciating dollar can drive gold prices higher. Additionally, lower interest rates tend to support gold prices, while a rally in stock markets can suppress demand for the metal.

Factors influencing gold prices include geopolitical instability and economic recessions. As gold is dollar-priced, its fluctuations are closely tied to US Dollar performance.

With gold holding just below $3,000 after briefly touching a record peak, current conditions suggest the metal remains well-supported. The retreat from its high was modest, and the broader market forces keeping it elevated remain in place. A softer US Dollar and renewed anxiety surrounding global trade policies are key drivers behind this firmness. This is unlikely to change in the short term, especially with upcoming US retail sales data capable of reinforcing or challenging the market’s current bias.

Ongoing tariff concerns, particularly those sparked by Trump’s latest statements targeting European imports, have added to uncertainty. We are seeing renewed turbulence in markets as responses to these policies begin to take shape. It is essential to recognise that when such policy shifts lead to weaker economic activity or reduced confidence, safe-haven assets such as gold tend to receive increased attention from investors.

Beyond trade policy, economic indicators from the United States offer little reason for optimism. The University of Michigan Consumer Sentiment Index slipping to 57.9 reflects lower consumer confidence, which is often a signal of slowing economic momentum. When consumer sentiment declines, markets typically expect a less aggressive monetary stance from central banks, which tends to favour gold by tempering expectations of higher interest rates.

On the geopolitical front, ongoing tensions in Eastern Europe and the Middle East continue to shape risk appetite across asset classes. The Houthis’ involvement in regional conflicts and persistent instability in Russia and Ukraine reinforce investor caution. However, the potential ceasefire proposal backed by the US and Ukraine has the capacity to shift sentiment if it gains traction. If the deal progresses, it could alleviate some war-related gold buying, though the likelihood of immediate resolution remains uncertain.

Gold’s enduring reputation as a store of value plays an important role in its recent performance. Central bank activity has provided further backing, with institutions accumulating gold at a record-setting pace. In 2022 alone, global central banks acquired over 1,100 tonnes of the metal, a clear indication of long-term confidence in its role as a hedge against economic and financial instability.

The interplay between gold and the US Dollar remains as relevant as ever. A declining dollar tends to provide tailwinds for gold prices, as it makes the metal cheaper for international buyers. Additionally, lower interest rates diminish the opportunity cost of holding gold, enhancing its appeal against yield-bearing assets. However, a strong equity rally could act as a headwind by redirecting capital flows away from safe-haven assets.

With economic and geopolitical uncertainty persisting, gold’s position remains highly responsive to these external influences. Since the metal is priced in US Dollars, its fate is closely tied to fluctuations in the currency’s strength and broader economic shifts. Given the current backdrop, each of these factors warrants careful observation in the weeks ahead.