Gold Rises Amid Tariff Uncertainty and Cooler U.S. Inflation

Gold prices climbed today driven by safe-haven buying as President Trump's 25% tariffs on steel and aluminum took effect. The precious metal advanced despite February's Consumer Price Index showing inflation rising less than expected at the slowest pace in four months. April gold futures increased by $20.60 (0.70%) to close at $2,943.40, marking the second significant daily gain this week.

February CPI Fails to Reassure Traders

The Consumer Price Index increased 0.2% after January's sharp 0.5% advance, according to Bureau of Labor Statistics data released Wednesday. Excluding volatile food and energy categories, the core measure also rose 0.2%.

This modest inflation reading helped the U.S. dollar achieve a fractional gain of 0.16% after seven consecutive daily declines in the dollar index. However, this dollar strength did little to impede gold's gains, as most analysts view today's dollar strength as temporary and expect the currency to resume its recent bearish trend.

The moderation in inflationary pressures failed to significantly impact market sentiment. President Trump claimed an early victory on inflation, with Press Secretary Karoline Leavitt stating on X: "Today's CPI report shows inflation is declining and the economy is moving in the right direction under President Trump." Leavitt added that Trump is "driving down costs" and the administration would continue addressing the "economic and inflation nightmare" inherited from the previous administration.

Despite cooler February inflation figures, analysts believe the Federal Reserve remains unlikely to cut rates in March, limiting gold's potential gains from this temporary easing of inflationary pressures.

Trumps Trade War Intensifies

Today, President Trump implemented 25% tariffs on all steel and aluminum imports, extending to hundreds of products manufactured from these metals. Within hours, both Canada and the European Union announced reciprocal tariffs in response. This escalating cycle of retaliatory taxation exemplifies a trade war, leaving traders and consumers anxious about April 2nd—when Trump has announced the U.S. will implement "true reciprocal tariffs."

At that point, all nations will be subject to these new reciprocal measures, whereby the U.S. will match any country's tariffs on U.S. exports with identical rates.

"It doesn't even matter what it is," Trump stated. "If they charge us 25% or 20% to 10% or 2% or 200%, then that's what we're charging them."

This policy of imposing tariffs without an upper limit risk rapidly escalating the trade dispute into a full-scale economic conflict. The potential costs to consumers could be substantial, highlighting gold's important role in preserving purchasing power as goods prices likely continue to rise alongside the erosion of the dollar's buying power.

Wishing you as always good trading,