Gold’s price (XAU/USD) has dropped by 3%, trading at $2,860, following a recent peak at $2,956. This decline comes after US President Donald Trump announced new tariffs on imports from Mexico, Canada, and China.

January’s US Personal Consumption Expenditures (PCE) figures show a monthly core PCE increase from 0.2% to 0.3%, with the headline PCE unchanged at 0.3%.

In China, Gold ETFs are gaining popularity, boosting holdings by 17.7 tons in February. Asian indices faced multiple percentage losses, while European markets showed over 1% losses.

The odds for a June interest rate cut have risen to 71.8%, influencing market sentiment. Gold’s weekly performance reflects a near 3% drop, with support levels at $2,790 and tactical resistance near $2,888.

Interest rates play a role in currency strength, with higher rates typically benefiting the local currency and impacting Gold prices unfavourably. The Fed funds rate is crucial for markets, shaping expectations around future economic conditions.

This recent drop in gold’s price follows a sharp rally that saw it reaching highs of $2,956 before pulling back. The downturn stems from new trade tariffs introduced by Donald Trump, which have injected fresh uncertainty into global markets. While gold is often considered a safe haven during such periods, elevated interest rate expectations and shifting economic data have put downward pressure on the metal.

January’s core PCE reading moving higher to 0.3% signals that inflation remains slightly sticky. Although the headline figure holding firm suggests a lack of major shifts in underlying inflation trends, markets may interpret this as the Federal Reserve having less urgency to cut rates in the immediate term. A stronger-than-expected cost environment can dampen rate-cut enthusiasm, affecting gold’s appeal as a non-yielding asset.

China’s gold ETFs pulling in nearly 18 tons in February highlights an ongoing appetite for bullion in the region. This demand, especially from institutional buyers, could support prices over time. However, Asian stocks suffering notable drops while European equities declined more than 1% points to a broader unease among investors. Such turbulence often drives capital into defensive assets, yet gold’s retreat suggests traders may be adjusting to shifting monetary expectations.

With traders now placing a 71.8% probability on a rate cut by June, sentiment remains tilted towards looser monetary policy. This should, in theory, offer gold a tailwind. However, shifting expectations can be volatile, particularly as policymakers gauge incoming data. While recent declines have erased a week’s worth of gains, the $2,790 level remains a key point for buyers to defend. Resistance at $2,888 will likely determine whether short-term momentum can shift back upwards.

The ongoing relationship between interest rates and gold remains clear. A push towards higher Fed rates strengthens the US dollar, which can weigh on gold’s price performance. The federal funds rate continues to be a central driver, shaping inflation outlooks and broader market conditions alike. Understanding how rate forecasts shift will be essential in gauging momentum in the weeks ahead.