Gold continues its bull run amid heightened market volatility and escalating global trade tensions. While the yellow metal has witnessed some profit booking at higher levels amid a sharp rise in the U.S. Dollar, it still ended February with positive gains, extending its rally to the second consecutive month.
Spot gold prices climbed 2.15% last month, rising from $2,801 to $2,858 per troy ounce. In the last week, gold tumbled 2.63%, marking its biggest weekly drop since November. Prior to this, it had ended an eight-week winning streak, which was its longest rally since the pandemic-era surge.
Notably, gold recorded 10 fresh all-time highs last month, signaling growing investor uncertainty and a shift toward wealth preservation. The yellow metal has long been considered the safest investment during periods of economic distress.
On February 24, the metal touched a fresh peak of $2,953 (spot), prompting analysts to revise their target prices higher as it breached their previous projections earlier than expected. So far this year, gold is up 9%. Looking back, prices have been rallying over the past year without any significant pullback, rising from $2,039 per troy ounce to the current $2,858—a stellar gain of 40%.
The escalation of global trade tensions has been sending cautionary signals, leading investors to avoid risky assets such as stocks. Analysts believe that rising trade tensions between major economies could fuel global inflation and slow economic growth, further supporting the upward trajectory of precious metal.
Trump announced on Thursday that his proposed tariffs on Mexico and Canada will take effect on March 4, following a one-month pause. He claimed that both countries had not done enough to curb the flow of drugs across the border.
He also announced that China, which is already subject to a 10% tariff from the U.S., would face an additional 10% levy. Furthermore, Trump has threatened to impose a 25% tariff on imports from the European Union. His administration is also working on reciprocal tariffs against all countries that impose tariffs on U.S. goods or implement non-tariff barriers restricting U.S. market access.
Trump’s tariff plans have also prompted some of the largest banks in the U.S. and Britain to transport gold bars from London to New York City on commercial flights.
Trump’s trade actions are not only unsettling investors but also raising concerns among U.S. consumers and the Federal Reserve. Consumers are increasingly worried about a potential rise in domestic prices if tariffs take effect, which could put pressure on their spending. Meanwhile, the country's central bank is closely monitoring White House trade policies to assess their potential impact on the economy.
The PCE data, released last week, showed that PCE prices rose 0.3% month-over-month in January, in line with expectations, suggesting that the Federal Reserve may adopt a cautious stance on further rate cuts.
Excluding food and energy, core PCE also rose 0.3% for the month and stood at 2.6% annually. Fed officials more closely follow the core measure as a better indicator of longer-term trends.