Gold prices declined following a surge in the US dollar and rising Treasury yields, putting pressure on the precious metal after it reached a historic high earlier this week. As of Wednesday, bullion was trading near $2,900 per ounce, down roughly 2% from its record-breaking peak. The strengthening dollar makes gold less attractive to investors holding other currencies, as the metal is priced in US dollars. Additionally, higher Treasury yields dampen demand for gold, which offers no interest return.
The recent rally in gold was largely driven by investor demand for safe-haven assets, spurred by uncertainty surrounding US President Donald Trump’s controversial tariff policies. On Monday, Trump announced plans to impose 25% tariffs on the European Union, while a White House official confirmed that the deadline for imposing tariffs on Canada and Mexico remained set for March 4, though Trump has yet to decide whether to grant an extension.
The president’s unpredictable stance on tariffs and his broader geopolitical actions have added to market uncertainty, reinforcing gold’s reputation as a store of value during turbulent times. Additionally, research suggests that the proposed tariffs on Chinese imports could hurt the US economy more than current trade data indicates.
Treasury investors expect the Fed to shift its focus from inflation control to economic growth, a move that could benefit gold as lower interest rates make non-yielding assets like the precious metal more attractive.
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