Gold Drops to $2,916.09 as Yield Surge and Tariff Uncertainty Pressure Prices

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Gold Price Declines Amid Rising Treasury Yields, Trade Tensions Offer Support

Gold prices retreated on Wednesday, halting a two-day upward trend, as increasing U.S. Treasury yields exerted downward pressure on non-yielding assets. Spot gold slipped 0.1% to $2,916.09 an ounce as of 0028 GMT, while U.S. gold futures edged up 0.2% to $2,926.10. However, the precious metal found potential support from safe-haven demand amidst the implementation of U.S. tariffs. President Trump’s 25% tariffs on imports from Mexico and Canada, along with the doubling of Chinese duties to 20%, took effect on Tuesday, escalating trade tensions and prompting retaliatory measures.

Despite the tariff implementation, U.S. Commerce Secretary Howard Lutnick suggested in a Fox News interview that President Trump might reconsider his policy within 48 hours. He indicated that adherence to USMCA rules could lead to relief. However, reports from the New York Times revealed that Trump has privately signaled his intention to maintain the tariffs.

Gold also attracted buyers as a safe-haven asset following the U.S. halt of military aid to Ukraine. Bloomberg reported that all U.S. military equipment not yet in Ukraine would be grounded, including weapons in transit. This development coincided with heightened tensions between President Trump and Ukrainian leader Volodymyr Zelenskyy during peace deal negotiations.

The U.S. Dollar Index (DXY) traded around 105.70, experiencing a slight increase amid rising U.S. Treasury yields, with 2- and 10-year yields at 3.98% and 4.25%, respectively. However, the USD faced downward pressure due to growing concerns about slowing economic growth and the impact of tariffs on the U.S. economy. Markets speculated that President Trump might reverse his tariff threats.

Canada confirmed its intent to impose retaliatory tariffs on U.S. imports, and China’s Commerce Ministry announced additional tariffs of up to 15% on key U.S. agricultural products. These developments heightened the risk of a global trade war, impacting investor sentiment and potentially supporting gold as a safe-haven asset.

The Institute for Supply Management’s (ISM) Manufacturing PMI decreased to 50.3 in February, while the Prices Paid Index surged to a nearly three-year high, reflecting concerns about import duties. These factors, coupled with worries that Trump’s tariffs could undermine consumer spending and impact the U.S. economy, could provide further support for the XAU/USD pair.