Gold Prices Under Pressure as US Treasury Yields Rise.
Gold prices are struggling to maintain momentum as rising US Treasury yields weigh on non-yielding assets. The yellow metal, which had been on a two-day winning streak, dipped on Wednesday as investors turned to bonds, which are offering higher returns. However, gold could still find support from safe-haven demand amid escalating trade tensions and geopolitical risks.
Treasury Yields Weigh on Gold
The rise in US Treasury yields is a key factor pressuring gold prices. The yield on the 10-year US Treasury bond reached 4.25%, while the 2-year yield stood at 3.98%. Higher yields make fixed-income investments more attractive, reducing demand for gold, which does not offer interest or dividends.
As a result, the US Dollar Index (DXY), which measures the greenback against six major currencies, climbed to 105.70. A stronger dollar makes gold more expensive for foreign investors, adding to the metal’s downside pressure.
Despite this, concerns over economic growth and the impact of tariffs on the US economy have kept the dollar from rallying further. Many market participants believe that President Trump may reconsider his tariff policies, which could weaken the dollar and provide support for gold.
Tariff Tensions Fuel Uncertainty
Gold’s safe-haven appeal remains intact due to uncertainty surrounding US trade policies. Trump’s 25% tariffs on Canadian and Mexican imports took effect on Tuesday, alongside a hike in Chinese duties to 20%. These measures have escalated trade tensions, prompting retaliation from major trading partners.
Canada has confirmed it will impose retaliatory tariffs on US imports, while China’s Commerce Ministry announced additional duties of up to 15% on key US farm products. The potential for a global trade war is rising, which could weaken investor confidence and push more funds into safe-haven assets like gold.
US Commerce Secretary Howard Lutnick stated in a Fox News interview that Trump may reconsider his tariff policy less than 48 hours after implementation. He suggested that if the United States-Mexico-Canada Agreement (USMCA) rules are followed, relief could be offered. However, the New York Times reported that Trump has privately signaled his intention to maintain the tariffs.
This back-and-forth has created uncertainty in financial markets, supporting gold’s role as a hedge against economic and political instability.
US Halts Military Aid to Ukraine
Another factor supporting gold prices is the US decision to pause military aid to Ukraine. According to Bloomberg, a defense official confirmed that all US military equipment not yet in Ukraine—including weapons in transit—would be grounded. This includes arms in transport via aircraft and ships, as well as those awaiting transit in Poland.
This move has heightened geopolitical risks, as tensions between US President Donald Trump and Ukrainian leader Volodymyr Zelenskyy escalated during recent peace negotiations. Any increase in geopolitical uncertainty tends to drive investors toward safe-haven assets, which could provide support for gold.
Economic Concerns Add to Gold’s Appeal
The impact of tariffs on the US economy is becoming increasingly evident. The Institute for Supply Management’s (ISM) Manufacturing PMI dropped to 50.3 in February, down from 50.9 in the previous month. Meanwhile, the Prices Paid Index surged to a nearly three-year high, reflecting worries over rising costs due to tariffs on imports.
With inflationary pressures growing and the potential for weaker consumer spending, concerns about the economic outlook are rising. If economic conditions worsen, the Federal Reserve may need to consider rate cuts, which would weaken the dollar and boost gold prices.
Market Sentiment and Gold’s Future
Despite recent declines, gold remains a key asset in times of uncertainty. Investors are closely watching Trump’s trade policies, economic data, and geopolitical developments for further direction.
If the US economy shows signs of further weakness, gold could see increased demand. Likewise, if geopolitical risks escalate—whether in Ukraine or through worsening trade tensions—gold’s safe-haven appeal will likely strengthen.
At the same time, if Treasury yields continue to rise and the Federal Reserve maintains a hawkish stance, gold could face continued pressure. The market remains in a delicate balance, with multiple factors influencing the metal’s future direction.
Conclusion
Gold prices are currently facing downward pressure from rising US Treasury yields and a strengthening dollar. However, trade tensions, geopolitical uncertainty, and economic concerns are providing some support. The next moves in gold will likely depend on developments in US trade policy, economic data releases, and global political events.
Investors should remain cautious, as market volatility remains high. While gold may struggle in the short term due to rising yields, its safe-haven status could provide resilience amid ongoing uncertainty.
