Gold Rises on Dollar Weakness; US Payrolls Data Eyed

Gold prices surged higher on Monday, driven by a weaker US dollar and increasing safe-haven demand, as investors awaited the release of US payrolls data later this week. The precious metal climbed to its highest level since early March, with the April gold futures contract settling at $2,905.90, up $38.60 or 1.35% for the session.



The dollar index declined by 0.86% to 106.585, providing substantial support for gold's upward movement. This weakness stems primarily from Eurodollar strength, which carries the heaviest weighting (57.6%) in the dollar index. Enhanced yields on European government bonds following positive economic news in the eurozone contributed to the dollar's decline. Additionally, weaker-than-expected US economic data put further pressure on the greenback.

The February ISM manufacturing index fell 0.6 points to 50.3, falling short of expectations of 50.7. Meanwhile, the February ISM prices paid sub-index rose 7.5 points to a 2-1/2 year high of 62.4, significantly stronger than the expected 56.0, signaling potential inflationary pressures in the manufacturing sector.

Market participants are now keenly focused on tomorrow's implementation of US tariffs on Canadian and Mexican imports. According to mt Newswires, "Trump has promised to impose 25% tariffs on imports from Canada and Mexico beginning on Tuesday, along with a 10% levy on energy imports from Canada, which supplies about 20% of US oil demand. The president is also raising the tariff on imports from China to 20% from 10%."

Both Canada and Mexico have announced plans for retaliatory tariffs on American imports, raising concerns about a potential large-scale trade war that could boost inflation while simultaneously slowing economic growth across North America.

Geopolitical tensions add to safe-haven appeal
Gold's gains were further fueled by growing geopolitical concerns following a contentious Oval Office meeting between President Trump and Mexican President Enrique Peña Nieto. The meeting ended without a deal, raising fears of a potential trade war between the two countries.

Investors are now looking ahead to Friday's US payrolls report, which is expected to show a gain of 185,000 jobs in February, according to a Bloomberg survey. A stronger-than-expected jobs report could reinforce the Federal Reserve's hawkish stance, potentially leading to a more aggressive interest rate hike in March. This, in turn, could strengthen the US dollar and put downward pressure on gold prices.

However, if the jobs report disappoints, it could ease concerns about a more aggressive Fed policy, potentially leading to a weaker US dollar and further supporting gold prices. Additionally, any signs of escalating geopolitical tensions or increased uncertainty in the global economy could further boost gold's safe-haven appeal.

In conclusion, gold prices rallied sharply higher on Monday, driven by a weaker US dollar and increasing safe-haven demand. Investors are now focused on the upcoming US payrolls data, which could have significant implications for the precious metal's price trajectory in the coming weeks. As geopolitical tensions and economic uncertainty continue to evolve, gold's safe-haven appeal is likely to remain a key driver of its price performance.