Gold dropped below $3,030 per ounce on Monday, marking its third consecutive session of losses, as profit-taking and margin calls in other asset classes prompted investors to liquidate some of their gold holdings to cover losses.
Gold extends decline on Monday
The precious metal, which had seen significant gains earlier in the year amid rising global uncertainties, came under pressure as broader financial markets reacted sharply to the escalating trade tensions under President Donald Trump. The intensification of the U.S.-China trade war, with Trump’s imposition of a blanket 10% tax on imports, has caused widespread concerns that it could lead to a global recession, dampening investor sentiment and prompting a sell-off in riskier assets.
The ongoing trade war has already triggered significant market volatility, with equity markets suffering sharp declines, and commodities, including oil, experiencing significant price swings. As a result, some investors have turned to liquidating assets like gold to cover margin calls and balance their portfolios. This selling pressure, combined with a broader market correction, has weighed on the price of gold, despite its traditional role as a safe-haven asset during periods of geopolitical and economic uncertainty.
Outlook is clouded
Furthermore, the outlook for gold is clouded by the broader economic risks posed by Trump’s tariffs, which are expected to increase the cost of imported goods and potentially stoke inflationary pressures. Federal Reserve Chairman Jerome Powell has warned that these tariffs could raise the risks of higher inflation and slower economic growth, posing a significant challenge for policymakers who are already grappling with economic headwinds. As inflationary pressures rise, central banks, including the Federal Reserve, may be forced to reconsider their monetary policy stance, with potential implications for interest rates and broader market liquidity.
Despite the recent pullback in gold prices, the precious metal could continue to see support from its safe-haven appeal, particularly if trade tensions continue to escalate and global economic growth remains under threat. Investors are likely to continue monitoring developments in the trade war, as well as any potential policy responses from central banks, which could influence gold’s price trajectory in the coming months.
