Gold experienced a major sell-off last week. The precious metal dropped 3% due to major factors influencing the global markets, including the ongoing peace talks over the war in Ukraine, Trump tariffs, and a hawkish Fed.
Ukraine Peace Talks
Gold has been pressured since peace talks started to end the war in Ukraine. Last month, negotiations began as US-Russia delegations met in Riyadh, aiming for a ceasefire. Since the announcement, gold dropped from $2,954 and continued to trend downwards.
Easing tensions could shift investor focus from safe havens to riskier assets. However, setbacks in negotiations, such as the heated exchange between Ukrainian President Zelensky and US President Donald Trump in the White House on February 28, faded some hopes of a ceasefire. ⁽¹⁾
European leaders, led by British Prime Minister Keir Starmer, are working on a peace proposal for Ukraine to present to the United States. The plan seeks to secure security guarantees from Washington to deter further Russian aggression. This initiative follows a tense meeting between Ukrainian President Volodymyr Zelensky and US President Donald Trump. ⁽²⁾
While peace talks introduce volatility, gold’s broader trajectory remains tied to inflation fears and global economic policies.
Trump’s Tariff Plans Spark Market Uncertainty
Another contributing factor to gold’s decline was Trump’s reaffirmation of tariffs, which were set in motion on March 4. Trump imposed 25% tariffs on imports from Canada and Mexico, with an additional 10% tariff on Chinese imports, escalating fears of a trade war. ⁽³⁾
Gold tends to rise during times of geopolitical tensions. ⁽⁴⁾. However, the precious metal came under pressure from uncertainties around China’s future growth, which overshadowed gold’s safe-haven appeal, contributing to its weekly loss of 3%. ⁽⁵⁾
Hawkish Fed and Dollar Strength Add Pressure on Gold
Gold was also hit by inflation figures from the US with numbers that exceeded expectations. The US PCE Price Index increased by 0.3% in January, meeting expectations and signaling a more cautious stance from the Fed on rate cuts, which supported the USD. ⁽⁶⁾
Outlook: Temporary Dip or Trend Reversal?
Despite this week’s losses, gold’s decline may be temporary as trade war uncertainties and geopolitical risks could renew its safe-haven appeal—especially with anticipated Fed rate cuts in 2025. ⁽⁷⁾
The US economy reported a solid 2.3% GDP growth in Q4 2024, but a cloudier 2025 outlook due to Trump’s policies could support gold’s safe-haven appeal in the future.
