Gold May Have to Pause Its Rally in March

Gold prices have surged by 2.5% to $2,954 per troy ounce this week, marking the seventh all-time high in February. The rally continues as U.S. President Donald Trump escalates his tariff disputes globally.

Trump remained silent last week amid persistent U.S. inflation, which rose to 3.0% YoY in January. Meanwhile, Federal Reserve (Fed) Chair Jerome Powell signalled that the Fed is likely to delay rate cuts for an extended period. However, Trump has been vocal in pushing the central bank to lower interest rates immediately. Investor confidence in Powell appears to be waning, as evidenced by last week's $482.7 million net outflows from the SPDR Gold Trust (GLD), slowing gold's upside momentum to just 0.8% in the second week of February.

The tariff battle intensified on Monday when Trump announced new 25% levies on vehicles, semiconductors, and pharmaceuticals starting April 2. This move reinforces expectations of a more hawkish Fed stance, potentially leading to another week of outflows from GLD. However, the People's Bank of China (PBOC) may counterbalance this by extending its three-month gold-buying streak through February, as Beijing seeks to diversify its reserves amid trade uncertainties.

Gold has now broken through the $2,940–2,960 resistance level and is targeting $3,040–3,060, with the potential to reach $3,150–3,250—another 7–10% upside. However, a favourable period for gold prices is expected to end in March. Historically, gold has defied technical patterns, but a temporary pause in its rally is likely before resuming in April–May when favourable conditions return.

Geopolitical developments could further weigh on gold. U.S.-Russia talks have accelerated, with an official negotiation round in Saudi Arabia on February 18 and a potential meeting between Trump and Vladimir Putin by the end of the month. These signals of easing tensions could dampen gold demand. Additionally, Trump announced that Chinese President Xi Jinping may visit the U.S. soon, possibly to negotiate and sign a trade deal. If successful, this could curb PBOC’s gold purchases.

Given these factors, gold faces several headwinds that may limit its upside in March. However, if prices firmly surpass the $2,940–2,960 resistance, further gains are likely before the end of February. A period of sideways movement or a slight retreat is expected in March, though any pullback is unlikely to extend beyond the $2,840–2,860 support range.