Gold prices fell close to 1 percent on Monday after rising to an all-time high in the previous session as the U.S. dollar strengthened on rising fears of a global trade war following U.S. President Donald Trump’s tariff measures.
In the UAE, gold rates fell, with 24-carat gold and 22-carat gold losing AED2.25 to AED336.75 and AED311.75, respectively. Meanwhile, 21-carat gold dipped AED2 to AED301.75 and 18-carat gold ticked down AED1.75 to AED258.75.
Globally, spot gold fell 0.52 percent to $2,784.01 per ounce, as of 6:14 GMT. Prices hit a record high at $2,817.23 on Friday. Meanwhile, U.S. gold futures declined 0.71 percent to $2,814.80.
The U.S. dollar index gained 1.12 percent to 109.59, making bullion more expensive for other currency holders.
Global trade war fears mount
Tariff announcements typically drive gold prices up amid increased safe-haven demand. However, a higher dollar and expectations of fewer rate cuts this year are exerting downward pressure on the precious metal.
On Saturday, Trump levied 25 percent tariffs on Canadian and Mexican imports and 10 percent on goods from China starting February 4. White House officials said there would be no exclusions from the tariffs.
Canada and Mexico ordered retaliatory measures, while China said it would challenge tariffs at the World Trade Organization and take unspecified countermeasures.
The U.S. dollar spiked in reaction to Trump’s tariff moves, which in turn, weighed heavily on gold prices.
Further tariff escalation should be bullish for gold and will likely push prices to $3,000 per ounce. However, some market participants noted that bearish movement from equities could impact gold prices in the short term.
Economic data signals slower rate cut pace
Investors remain worried that Trump’s new tariffs could significantly worsen inflation in the U.S. and validate the Federal Reserve’s expectations, further impacting gold prices.
The U.S. commerce department reported on Friday that inflation ended 2024 on a strong note and consumer spending surged in December, pushing back expectations for more aggressive easing by the Fed.
The personal consumption expenditures (PCE) price index rose to 2.6 percent year-on-year in December from 2.4 percent, while the core gauge climbed 2.8 percent, matching November’s reading and consensus estimates.
U.S. Treasury Secretary Scott Bessent, who pushed for new universal tariffs on imports to start at 2.5 percent and rise gradually, said that tariffs are inflationary and would continue to strengthen the U.S. dollar.
On Wednesday, Fed Chair Jerome Powell said inflation and jobs data would determine when another easing would come. The U.S. central bank decided to keep policy unchanged at the end of a two-day meeting on Wednesday and signaled that there would be no rush to lower borrowing costs until inflation and jobs data made it appropriate.
Following the Fed’s first rate cut pause since September, the market expects the U.S. central bank to stay cautious when it comes to policy easing. Higher interest rates reduce the appeal of non-yielding assets like gold.
Other precious metals
As gold prices declined from their new high, the precious metals market saw a downward movement on Monday. Spot silver fell 1.27 percent to $30.91 per ounce, platinum dipped 1.36 percent to $964.27 and palladium fell 0.49 percent to $1,003.34.
