On Wednesday (February 12th), in the morning session of the Asian market, spot gold fluctuated narrowly and is currently trading around $2900 per ounce. Gold prices surged and fell back on Tuesday, as investors took profits after the gold price hit a historic high. The testimony of the Federal Reserve Chairman in Congress stated that there is no rush to cut interest rates, which also suppressed gold prices. However, due to concerns that US President Trump's new tariff measures will trigger a global trade war, investors still remain bullish on gold prices.

Daily chart of spot gold

Spot gold closed down 0.36% on Tuesday at $2897.38 per ounce, having previously hit a high of $2942.70 earlier in the session, marking the eighth record breaking high of the year.

Jim Wyckoff, a senior market analyst at Kitco Metals, said, "I just saw some short-term futures traders taking profits... The market rally is a bit excessive and is in need of some downward correction pressure and some chart based consolidation

Federal Reserve Chairman Powell testified before the Senate Finance Committee on Tuesday, stating that given the overall strength of the economy and inflation rates still above the 2% target, the Fed is not in a hurry to cut interest rates.

At Trump's first congressional hearing after taking office, Federal Reserve Chairman Powell affirmed the strong performance of the economy during Trump's tenure, but chose to avoid issues such as tariffs, Musk's role in the government, and bank account security, which reflect the uncertainty of the new administration in its early days.

The explicit purpose of Powell's twice yearly congressional hearings is to discuss economic conditions and monetary policy, but the actual situation is often much more than that. Powell has a lot to say on these issues, and almost all of them are positive, as the current US unemployment rate is 4%, inflation is close to the Fed's 2% target, and the economy continues to grow.

Our economy is currently in a fairly good state, "Powell said, noting that the Federal Reserve is not in a hurry to further cut interest rates, but is ready to take action if inflation further declines or the job market weakens.

However, during the more than two-hour testimony before the Senate Finance Committee, the core tasks of the Federal Reserve in maintaining price stability and achieving full employment seemed to have become secondary issues. The rest of the hearing reflects the turmoil and chaos that Washington felt during the first few weeks of the Trump administration.

Investors still expect the Federal Reserve to cut interest rates later this year, but the possibility has shifted to only one 25 basis point rate cut.

Kathy Bostjancic, Chief Economist of Nationwide, stated that due to changes in the economic environment, she now expects the Federal Reserve to only cut interest rates once this year and will not take action until the second half of the year.

Gold is considered a tool for hedging against inflation, but rising interest rates have dampened the attractiveness of this non yielding asset.

Wyckoff said that considering any new policies that Trump may announce, potential uncertainty could support gold prices, and profit taking situations like today could be seen by bullish traders as opportunities to buy on dips.

Trump has significantly increased tariffs on imported steel and aluminum to a unified 25%, with "no exceptions or exemptions". He hopes this move can help struggling industries in the United States, but there is also a risk of triggering a multi line trade war.

Mexico, Canada, and the European Union on Tuesday condemned US President Trump's decision to impose tariffs on all imported steel and aluminum next month, exacerbating concerns about a trade war.

Mexican Economy Minister Marcelo Ebrard called the tariff decision "unreasonable" and "unfair". He did not disclose whether Mexico plans to impose equivalent tariffs on steel or aluminum imported from the United States.

Canadian Prime Minister Trudeau said that tariffs are "unacceptable". He said at the Artificial Intelligence Summit held in Paris that Canada's response would be firm and clear if needed.

When asked about the threat of retaliation from other countries against its new tariffs, Trump said, "I don't mind

Von der Leyen, the president of the European Union Executive Committee, expressed her deep regret for the decision of the United States, and added that tariffs are taxes, which are not good for enterprises, but even worse for consumers. Over the past decade, the average annual steel exports from the European Union to the United States have been around 3 billion euros (3.1 billion US dollars).

She said in a statement, "We will not remain indifferent and impose unreasonable tariffs on the EU - which will provoke firm and moderate countermeasures

Traders are closely monitoring the US inflation data released on Wednesday in search of new clues on the outlook for interest rates in the world's largest economy. The market expects the US CPI to rise by 2.9% year-on-year in January, consistent with December, and is expected to increase by 0.3% month on month, compared to the previous value of 0.4%; It is expected that the core CPI in the United States will increase by 3.1% year-on-year in January, compared to 3.2% in December, but still far above the Federal Reserve's 2% target. It is expected to grow by 0.3% month on month, compared to the previous value of 0.2%.

In addition, investors need to pay attention to the speech by Atlanta Fed President Bostic on the economic outlook. EU trade ministers will hold a video conference to discuss Trump's imposition of steel and aluminum tariffs, and investors also need to pay close attention.