Gold prices plummeted as Mr. Donald Trump announced new taxes

Gold prices fell sharply in the New York trading session on Thursday, with the April gold futures contract falling to $2,887.8/ounce, down $43.9 (1.50%). The precious metal hit a two-day low of $2,879 before recovering slightly.

This is the third time in recent weeks that gold prices have fallen more than $40 in a session, following a $63 decline on Friday, February 14.

The increase in the price of the USD is the main factor causing gold to decline. The USD index increased by 0.74% to 107.22. Analysts said that about half of today's gold price decline came from the stronger USD, the rest was due to direct selling pressure in the gold market.

This sell-off came after US President Donald Trump suddenly announced new tax measures, creating mixed reactions in the market.

Previously, investors have poured capital into safe-haven assets such as gold to hedge against risks from tax policies that could affect global trade flows. Mr. Trump has pledged to postpone the tariffs on Canada and Mexico until April 2.

However, on February 27, he announced that a 25% tariff on imports from Canada and Mexico would take effect next Tuesday, in addition to the 10% tax on Chinese goods that has been implemented since the beginning of this month.

We cannot let this disaster continue to hurt the United States. The tax will be in place until it is stopped or severely restricted," Trump wrote on his Truth Social platform.

Mexico and Canada have said they will take retaliatory tax measures on US goods if Trump meets the threat. Economists warn that escalating trade tensions could slow economic growth and push inflation higher in all three North American countries.

The market's attention is now focused on the Personal Consumption Expenditures Price Index (PCE) report released on February 28. According to Fact Set's estimate, January PCE inflation is expected to increase by 0.3% compared to the previous month and 2.5% compared to the same period last year, showing that inflation is still higher than the expectations of the Federal Reserve (FED) and investors.

If inflation continues to remain high, the Fed is likely to keep the benchmark interest rate unchanged instead of cutting as previously expected.

In addition, gold prices are currently under pressure when new US economic data is released. The US Commerce Department announced that long-term commodity orders increased by 3.1% in January, far exceeding analysts' forecast of 1.3%, and reversed the 1.8% decrease in December.

The January long-term orders data showed that demand in the US economy is still quite strong. This is often seen as a positive signal for the USD and could put downward pressure on gold prices because gold is an uninterrated asset.

Meanwhile, data from the National Association of Realtors (NAR) also put more pressure on gold prices. The index of pending home contracts fell 4.6% in January, down to a record low of 70.6 - much lower than the forecast increase of 1.3%.

Compared to the same period last year, the number of contracts decreased by 5.2%, contrary to the expectation of a 6% increase. Housing affordability in the US weakened as mortgage rates ranged from 6.91% to 7.04% in January.