Gold Prices Dip as Trade Policy Uncertainty Offsets Haven Demand

Gold prices fall 1.05% as US dollar strength and profit-taking offset political uncertainty. Record ETF inflows and China's market return provide long-term support.

Gold is experiencing a modest pullback today, a development that appears counterintuitive given the current climate of political uncertainty which typically bolsters the metal. The shift is primarily driven by the latest evolution in U.S. tariff policy, hastily reconfigured following a Supreme Court ruling. This raises questions about the underlying strength of the recent rally, especially as a firmer U.S. dollar and profit-taking exert simultaneous downward pressure.

A Dual Force: Dollar Strength and Profit-Taking

After a run of four consecutive positive trading sessions, markets are seeing a wave of profit-taking in gold. Compounding this, the U.S. Dollar Index has edged higher, making the dollar-denominated metal more expensive for holders of other currencies and creating a typical headwind. These combined forces are reflected in the day's market data, showing a decline of -1.05% to $5,192.90.

Despite this retreat, the fundamental "safe-haven" investment case for gold remains intact. The supportive interest rate environment persists, with the source citing the 10-year U.S. Treasury yield at 4.07% and the Federal Reserve's key rate at 3.75%. While gold itself yields no interest, this backdrop is still considered favorable, though not potent enough in the short term to immediately override the dollar's strength and the selling for gains.

Global ETF Inflows and China's Return Provide Counterweight

Significant attention is on China's return to the markets following the week-long Lunar New Year holiday. The World Gold Council reported substantial January inflows into Chinese gold-backed ETFs totaling 44 billion yuan (approximately $6.2 billion), pushing holdings to a record 286 tonnes. The CPM Group suggested to Reuters that prices could see a "sharp increase" this week as trading activity resumes post-holiday. A countervailing seasonal factor, however, is the potential for demand to soften following the New Year celebrations.

The trend of robust ETF investment is a global phenomenon. Worldwide, gold ETFs attracted $19 billion in January 2026—a record monthly inflow—according to the World Gold Council. Total holdings grew by 120 tonnes to reach 4,145 tonnes.

Legal Wrangling Over U.S. Tariffs Sows Market Confusion

The immediate catalyst for today's market nerves stems from Washington. On February 20, the U.S. Supreme Court, in a 6-3 decision, ruled that the previous administration's use of the International Emergency Economic Powers Act (IEEPA) to impose tariffs was unconstitutional, clearly assigning that authority to Congress.

The policy response was swift. The administration pivoted to Section 122 of the Trade Act of 1974, which permits temporary tariffs in cases of "large and serious balance of payments deficits." This provided the legal basis for new global tariffs of 10%, effective today. While an increase to 15% (the statutory maximum) was announced on Saturday, the BBC reported no formal directive had been issued by Tuesday, leaving the rate at 10%. This very ambiguity is acting as a drag on market sentiment.

Trading partners are reacting. The European Union has suspended ratification of its trade deal with the U.S., and India has postponed talks on an interim agreement. The United Kingdom has hinted at retaliatory measures if the U.S. fails to uphold bilateral commitments. Furthermore, Reuters reported that on Monday, warnings were issued to countries challenging existing deals, threatening significantly higher tariffs under other trade statutes.

Geopolitical Calendar Adds Another Layer

Adding to the mix of factors is a key geopolitical event scheduled for Thursday: fresh U.S.-Iran talks on the nuclear program in Geneva. According to the source, these negotiations are currently at an impasse, a situation that helps sustain underlying demand for protective assets.

In summary, today's decline looks more like a cooling-off period following a recent series of gains rather than a definitive reversal of trend. The critical variables to watch in the coming days will be the response from Chinese market participants, the further specification of the Section 122 tariffs—including their 150-day duration without Congressional extension—and the outcomes from the Iran negotiations on Thursday.