Gold Retreats as Markets React to Tariff Uncertainty

Gold prices edged lower at week's start alongside broader declines in risk assets. Gold futures declined $14.70 (0.5%) to settle at $2,899.40, just below the psychologically important $3,000 threshold. This pullback coincided with the Dow Jones Industrial Average tumbling to its lowest point since November 4, 2023, closing over 2% down for the session.

The significant drawdown across risk assets likely contributed to gold's weakness, as traders may have liquidated gold positions to cover margin calls in other markets. However, profit-taking appears to have been the primary driver of gold's retreat, as earlier dollar strength gradually dissipated throughout the trading day.

Markets continue responding to President Trump's evolving tariff policies. Last Tuesday, Trump imposed 25% tariffs on Mexican and Canadian imports, before subsequently exempting numerous products from these North American trading partners for a 30-day period. The 25% tariffs on steel and aluminum imports are still scheduled to take effect Wednesday. Trump has also indicated he will announce "reciprocal tariffs" midweek, suggesting the U.S. will impose import duties on products from countries that have levied duties on American goods.

Key economic releases this week could significantly impact gold prices, particularly Wednesday's Consumer Price Index and Thursday's Producer Price Index reports. These inflation indicators may influence the Federal Reserve's monetary policy decisions, with potential far-reaching implications across various markets and asset classes.

Our technical analysis suggests further downside ahead. Elliott Wave patterns indicate gold and silver are in a C wave of a standard zigzag correction. Under this hypothesis, gold could decline to between $2,866 and $2,820 before completing the current A-B-C corrective pattern.

Wishing you, as always good trading,