【MACRO Insight】 The ever-changing gold market , short-term corrections and long-term support factors

Gold prices fell to their lowest level in two weeks on Thursday as the dollar strengthened and investors waited for key inflation data for clues on the Federal Reserve's monetary policy. In the early U.S. trading, the short-term decline was nearly $13, falling below $2,870/ounce, and the intraday decline was more than 1.60% . On Friday, it hit a new low and once fell below $2,860/ounce. The U.S. dollar index rose by more than 0.5%, standing above the 107 mark, further away from the recent 11-week low, making gold denominated in U.S. dollars more expensive for holders of other currencies. The yield on the U.S. 10-year Treasury bond rose by more than 1% at one point, weakening the relative attractiveness of gold, an interest-free asset.

U.S. President Trump's comments on tariff policy further exacerbated market uncertainty. He said on social platforms that new tariffs on Mexico and Canada will take effect on March 4, and 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 due to profit-taking selling after hitting an all-time high. On Monday, spot gold hit a record high of $2,956.15 per ounce due to safe-haven inflows. However, gold's pullback this week will end its eight-week winning streak, the longest consecutive rising cycle since 2020.

Investors are also looking for clues on U.S. monetary policy, with several officials set to speak later and the personal consumption expenditures (PCE) index to be released on Friday. U.S. bond investors expect the Federal Reserve to shift its focus from inflation to economic growth. The market expects the Fed to cut interest rates at least twice this year, with a rate cut of about 55 basis points expected in 2025. Any major changes in these (interest rate) expectations could lead to increased volatility in gold. Geopolitical risks and Trump's tariff policy could 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 the corrective decline to the $2,834 area and all the way down to the round mark of $2,800. On the other hand, if the price of gold breaks the immediate barrier of $2,920, it may attract sellers near the overnight high, that is, the area around $2,930. If the price of gold can move up firmly, it is possible to move further towards the resistance level of 2,950-2,955 or the record high reached on the first day of this week.

Although it has pulled back, gold prices may soon break through $3,000 amid ongoing geopolitical tensions and concerns about inflation and trade. So far in 2025, gold futures have risen by more than 9%, outperforming the S&P 500. Earlier this month, gold prices broke through $2,900, a record high , with central banks net buying gold for 15 consecutive years , and purchases began to increase significantly after the outbreak of the Russian-Ukrainian conflict . According to the World Gold Council, central banks purchased a record 1,082 tons of gold in 2022. In 2024, they added more than 1,000 tons 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 uncertain times. In recent years, the world has been plagued by various geopolitical events - 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 that support the rise in gold prices are not expected to disappear soon. In addition, other growing threats such as the swelling US deficit and protectionist rhetoric around tariffs have also made central banks around the world look for alternatives. But what is the alternative besides gold？

Concerns about U.S. policies, such as tariffs threatened by President Trump and swelling 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 bound by credit or other counterparties, making it an important reserve asset. UBS this week raised its 2025 gold price forecast to an average of $2,900, which could peak at $3,200 and close above $3,000 by the end of the year.

Gold prices have experienced a certain degree of correction in the near term, mainly due to the strengthening of the US dollar and the market's wait for key inflation data. However, in the long run, 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 dynamics, especially the Federal Reserve's monetary policy and geopolitical events, to formulate reasonable investment strategies.