Gold continues gains for second day

26 Mart 2025

Gold Continues Gains for Second Day Amid Deteriorating Sentiment About the US Economy

Written by Samer Hasn, Senior Market Analyst at XS.com

Gold continued its gains for a second day today, rising 0.2% and reclaiming the $3,025 per ounce level in spot trading.

Gold’s gains come as sentiment toward the U.S. economy continues to deteriorate, fuelled by growing concerns over the impact of Donald Trump’s policies, which are deepening pessimism among consumers and businesses alike.

On the consumer side, yesterday we saw a shocking report from the Conference Board on Consumer Confidence. The headline index recorded a reading below expectations, falling below 100-point for the second consecutive month, and the Expectations Index fell to a 12-year low.

Concerns about inflation, uncertainty surrounding Trump’s policies, and growing pessimism about interest rate cuts, along with the negative sentiment they are experiencing due to the stock market decline, have all contributed to this deterioration in consumer sentiment, which could be reflected in reduced spending.

On the business side, the S&P Global flash PMI Report showed similar signs to those of the consumers. Although services activity grew at a faster-than-expected pace, sentiment in the sector deteriorated to its second-lowest level since October 2022. In contrast, the manufacturing sector, while contracting faster than expected, remains optimistic, reflecting hopes for strong demand, favorable trade policies, and low taxes, according to the report.

These data followed a favorable speech by Jerome Powell following last week’s interest rate decision, which reinforced optimism about the possibility of achieving at least a half-percentage-point cut this year despite rising inflation concerns. This contributed to gold’s further gains.

Conversely, we are seeing signs that the trade war, which is primarily causing this wave of deteriorating sentiment, could weaken the premium gold enjoys due to this escalation. Optimism about the possibility of averting a full-blown trade war was reinforced by a meeting between a member of Congress and the former Chinese Premier on Sunday, which strengthened the assumption that negotiations are moving toward a settlement between the two trading poles.

Moreover, China appears more resilient to the consequences of the trade war. The mostly better-than-expected data released earlier this week led to more optimistic revisions to the economic growth outlook, according to the Wall Street Journal. Meanwhile, the negative outlook surrounding the Chinese economy’s ability to recover amid weak domestic demand and the threat to exports is fueling demand for gold as a safe haven throughout the year.

What may also prompt Trump to back down on his trade threats is the negative effects of his policies beginning to materialize even before they are implemented. This has already been reflected in recent surveys, lowered US growth forecasts, and the stock market crash.

 

Zaid Barem / ymm