Gold prices experienced an uptick early on Monday, driven by increased demand for safe-haven assets and a weakening U.S. dollar. The rally in gold prices came ahead of the U.S.'s imminent imposition of tariffs on imports from Canada and Mexico, its two largest trading partners. Additionally, the market saw heightened uncertainty following a tense meeting between U.S. President Donald Trump and Ukrainian President Volodymyr Zelensky on Friday.
As of the latest reports, April gold futures climbed by $33.70, reaching $2,882.20 per ounce.
Trump's administration is set to impose a 25% tariff on imports from Canada and Mexico, along with a 10% tariff on energy products from Canada, which accounts for about 20% of U.S. oil imports. The U.S. president has also announced an increase in tariffs on Chinese imports from 10% to 20%. In response, both Canada and Mexico have vowed to impose retaliatory tariffs on U.S. goods, igniting fears of a full-scale trade war that could drive up inflation and hinder economic growth in all three nations.
"Gold is climbing after its first weekly loss of the year, amid concerns that Trump's tariff policy could trigger inflation and slow economic growth, potentially leading to stagflation," noted analysts at Saxo Bank.
The geopolitical landscape also worsened following a highly charged meeting between Trump, Vice President J.D. Vance, and Zelensky, which ended in a shouting match. The confrontation raised doubts about the future of U.S.-Ukrainian relations and heightened fears that the U.S. might shift its support from Ukraine to Russia, further complicating efforts to resolve the ongoing conflict in Ukraine.
The U.S. dollar took a significant hit in the early trading hours, with the ICE U.S. Dollar Index dropping by 0.79 points to 106.83. Meanwhile, Treasury yields saw a modest rise, with the two-year U.S. Treasury note yielding 4.044%, up by 3.7 basis points, and the yield on the 10-year note climbing to 4.258%, a 3.8-point increase.
The current market dynamics highlight the growing demand for gold as a hedge against geopolitical and economic uncertainty, with investors seeking refuge in the precious metal as global tensions continue to rise.