Gold Demand Pushes XAUUSD to Weekly Highs

Gold prices surged to a weekly high near $3,133 as investors turned to the safe-haven asset in response to rising US-China trade tensions. Whenever global uncertainty escalates, gold becomes a go-to investment due to its perceived stability and protection against inflation. That’s exactly what’s happening now.

The spark this time came from a fresh round of tariff escalations. The US hiked tariffs on Chinese goods to 125%, and China responded with its own 50% tariff on US imports. Although President Trump briefly paused new tariffs on other nations, the tit-for-tat between the US and China has created enough fear to send investors into defensive mode—buying gold and avoiding risky assets.

Investors are worried that this back-and-forth could hurt global trade, stifle economic growth, and trigger a new wave of inflation. All of these fears support the rise in gold prices, as the metal is commonly seen as a shield against financial turmoil.

Fed’s Cautious Tone Keeps USD Weak and Gold Strong

Another major reason for gold’s strength is the changing tone of the US Federal Reserve. Market participants are now betting that the Fed will start cutting interest rates again—potentially as soon as June. These expectations are based on recent comments from Fed officials and the release of the March FOMC meeting minutes.

Although Fed officials acknowledged the inflation risk from tariffs, they also signaled caution in cutting rates too quickly. Minneapolis Fed President Neel Kashkari said the bar is high for rate cuts since tariffs could actually increase inflation. Other officials like Cleveland’s Beth Hammack and Richmond’s Tom Barkin also stressed a go-slow approach.

Still, traders are betting on 75 basis points of rate cuts over the rest of 2025. This expectation weakens the US Dollar, which in turn helps gold. Why? Because gold is priced in USD—so when the dollar drops, gold becomes cheaper for investors holding other currencies, boosting demand.

Interestingly, this bullish momentum in gold comes despite a rebound in risk sentiment. Stock markets bounced back due to optimism over Trump’s tariff pause on most nations. Normally, rising stock prices would reduce demand for safe havens like gold. But not this time—investors remain skeptical of global economic stability and are keeping their money in gold.

CPI Data Could Be the Game-Changer

The next big event that could shake up the gold market? The release of the US Consumer Price Index (CPI). This is one of the Fed’s key indicators for inflation, and it will directly influence the future path of interest rates. A higher-than-expected CPI could reduce the chances of a near-term rate cut, potentially boosting the US Dollar and slowing gold’s rally.

On the other hand, if inflation appears to be easing—or if it’s more “tariff-driven” and seen as temporary—the Fed might feel more comfortable beginning rate cuts. This would further weaken the dollar and supercharge gold prices.

Friday’s Producer Price Index (PPI) will also be closely watched, as it measures inflation at the wholesale level. Together, the CPI and PPI could shape the market’s expectations for the Fed’s next moves and, by extension, the direction of both the dollar and gold.

Until then, gold is holding firm. The yellow metal continues to attract buyers even in the face of shifting global sentiments, showing its resilience as a financial safe haven.

What’s Next for Gold?

With so many moving parts—geopolitical tensions, inflation data, and central bank policy—investors need to keep an eye on several key indicators:

1. US-China Trade Developments: Any new tariff announcements or peace talks could shift market mood instantly.

2. Fed Statements: Remarks from Fed officials before and after the CPI/PPI data releases will give clues about how seriously they’re considering rate cuts.

3. Global Risk Appetite: Even though gold has resisted pullbacks despite stronger stock markets, a surge in risk appetite could still trigger profit-taking in gold.

4. Inflation Reports: CPI and PPI data will offer the clearest signals about whether the Fed will act in June.

As long as the US Dollar remains weak and inflation fears persist, gold looks well-positioned to stay in demand. But any surprises in the data or Fed communication could cause sharp reversals.