Gold Corrects Lower as Markets Seek Safety in US Dollar

NEW YORK (February 27) Gold (XAU) prices drop after hitting the strong resistance band of $2,900–$3,000 as the US Dollar rebounds due to increased risk aversion. US economic data is mixed. GDP growth remains stable at 2.3%, but inflation indicators show an uptick. Core PCE prices rise to 2.7%, indicating concerns about persistent inflation. These figures strengthen the case for the Federal Reserve to maintain a cautious stance, supporting the US Dollar and pressuring gold.

On the other hand, labour market data shows weakness, with Initial Jobless Claims rising to 242K, surpassing expectations. However, Durable Goods Orders exceed forecasts, growing by 3.1% in January. Meanwhile, a steep drop in Pending Home Sales indicates a potential economic slowdown. Despite mixed data, market sentiment leans toward risk aversion, boosting the US Dollar as a safe-haven asset. This shift weighs on gold prices, pushing them toward a weekly low.

Moreover, geopolitical concerns also impact gold’s momentum. US President Donald Trump confirmed new tariffs on Canada, Mexico, and China, with implementation dates moved forward. The uncertainty surrounding trade tensions increases volatility in financial markets. However, investors seek refuge in the US Dollar instead of benefiting from gold as a traditional safe haven. With the upcoming release of the PCE Price Index, gold may remain under pressure if inflation data supports a stronger dollar.

FXEmpire