Gold prices drop on Tuesday due to profit taking, but losses were limited. Ongoing concerns about U.S. trade tariffs and deteriorating relations between Washington and Beijing kept demand for the yellow metal strong.
Overnight, gold prices surged close to record levels. Safe-haven demand pushed the metal higher, reflecting investor concerns over global uncertainties. However, as traders locked in profits, prices started to decline.
U.S. President Donald Trump reaffirmed his plans to impose a 25% tariff on Canada and Mexico by next week. This announcement contributed to market caution.
By early trading hours, spot gold had dropped 1.4% to $2,912.93 per ounce. Meanwhile, gold futures set to expire in April fell 1.3% to $2,924.71 per ounce. Last week, gold hit a record high of $2,956.37 per ounce, showing strong demand before the latest decline.
Despite the drop, gold prices remained supported by global trade tensions. Trump's proposed tariffs on Canada and Mexico could trigger retaliatory measures, escalating a trade war.
Additionally, relations between the U.S. and China continue to deteriorate. In February, Trump imposed a 10% tariff on all Chinese imports. In response, China implemented several countermeasures, including trade restrictions and export controls.
Recent reports suggest that the U.S. may tighten restrictions on semiconductor exports to China. If these measures take effect, Beijing is likely to retaliate further. Over the weekend, Trump signed an executive order aimed at restricting Chinese investments and exports. This move indicates growing tensions between the two economic giants.
Gold prices received support from a weakening U.S. dollar. Investor concerns over economic slowdowns pushed the greenback lower, making gold more attractive.
Recent data from the Conference Board revealed a sharp decline in U.S. consumer confidence. The index fell to 98.3 in February, down from 105.3 in January. This marked the biggest monthly drop since August 2021, raising concerns about economic stability.
As a result, investors speculated that the Federal Reserve might cut interest rates to support the economy. More insights will come later this week when U.S. GDP and inflation data are released.
Platinum futures rose slightly, gaining 0.3% to reach $973.35 per ounce. However, silver prices declined by 2%, falling to $31.952 per ounce.
In the industrial metals sector, copper prices faced downward pressure. London Metal Exchange (LME) benchmark copper futures dropped 0.9% to $9,407.20 per ton. Meanwhile, March copper futures slipped 0.2% to $4.5560 per pound.
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