At the beginning of the Asian market on Tuesday (February 18th), spot gold fluctuated narrowly and is currently trading around $2898.87 per ounce. Gold prices rebounded to around $2900 per ounce on Monday, closing at $2898.96 per ounce, an increase of about 0.56%, supported by concerns about a weak US dollar and a trade war triggered by US President Trump's threat to impose equivalent tariffs. However, Monday is the US President's Day holiday, and overall market trading is relatively light.

The US dollar is hovering around a two month low, reducing the cost for buyers holding other currencies to purchase gold.

UBS analyst Giovanni Staunovo said, "Gold still benefits from investors seeking safe haven assets amid concerns over tariffs and trade wars. We continue to see upward potential for gold, and expect it to rise to $3000, also benefiting from continued demand from central banks

US President Trump issued another tariff threat last Friday, stating that import tariffs on automobiles would be announced as early as April 2nd. According to the plan, cabinet members will submit a report on April 1st, providing policy options for a series of import tariffs to reshape global trade.

Gold is seen as a traditional hedge against inflation and geopolitical uncertainty, but the rise in interest rates has weakened the appeal of interest free gold. Goldman Sachs raised its gold price forecast for the end of 2025 to $3100 per ounce on Monday.

Some Federal Reserve officials will give speeches later this week, and market participants will pay attention to any clues about the direction of US interest rates. The US market is closed due to the President's Day holiday.

Although analysts believe that gold currently appears somewhat overbought, one analyst suggests that there is still significant upward potential for gold in the short term.

Tim Hayes, Chief Global Investment Strategist at Ned Davis Research, stated in his latest gold report that the weakening US dollar and declining bond yields provide good support for gold in the short term.

Hayes pointed out in the report, "The potential threat posed by rising bond yields and a strengthening US dollar has weakened. The bearish signal of our short-term US dollar composite indicator is giving a bullish vote to our gold observation report. In addition, the expected momentum reversal of 10-year real US bond yields and TIPS yields has brought these indicators closer to new bullish signals

At the time of Hayes' bearish view on the US dollar, the US dollar index was hovering around 106.75, close to a two month low.

Looking beyond short-term fluctuations, Hayes stated that gold is still in the early stages of cyclical and long-term bull markets. He pointed out that investor sentiment indicators were quite negative in December last year, but have now entered a neutral zone. However, these indicators are still far below the level of excessive optimism, which usually indicates a process of peaking.

Compared to the M2 money supply, the upward trend of gold does not seem excessive, "Hayes said in the report. By contrast, the ratio of the US dollar to its long-term trend has risen to the top 20% of its reading range. In the following 1 to 10 years, a weakening of the US dollar typically occurs after the reading in that range

Hayes pointed out that as gold remains an attractive safe haven asset and a hedge against economic and geopolitical uncertainty, investor sentiment is improving.

The global economic uncertainty index has risen to levels only below those during the 2020 pandemic. Over the past 10 years, the index has been rising in sync with gold, "he said. If the escalating trade war leads to rising inflation, gold may be threatened by rising bond yields and a reduced possibility of central bank policy easing. Otherwise, gold will not only benefit from the depreciation of the US dollar, but also from the sustained growth of the US real money supply and the growth of fiscal spending minus income, all of which are components of the US real monetary, fiscal, and exchange rate policy index

It should be noted that Russian and US officials will hold a meeting on the Ukraine issue in Saudi Arabia this trading day, and investors need to pay close attention and monitor changes in market sentiment.

In addition, the Reserve Bank of Australia's interest rate decision will be announced within the day, and the market generally expects a 25 basis point rate cut. Investors also need to pay attention.

According to a Reuters survey, over 90% of surveyed economists believe that the Reserve Bank of Australia will cut interest rates, with a market estimate of an 87% chance of a rate cut. However, Lachlan Dynan, macro strategist at Deutsche Bank, believes that this decision should be more balanced rather than almost certain.

Dynan said, "Our basic scenario is a neutral to hawkish rate cut, which means policy easing while providing the lowest level of forward guidance

In terms of data, pay attention to the manufacturing index of the Federal Reserve of New York in February of the United States and the CPI data of Canada in January.