- The price of gold falls to about 2,765 $ in the early Asian session on Monday.
- Trump imposed 25% tariffs on Colombia by refusing migrant deportation flights, raising the USD.
- The Fed is expected to keep the rates without changes on Wednesday.
The price of gold (Xau/USD) drops around $ 2,765 during the early Asian session on Monday, pressed by the renewed demand of the US dollar (USD). However, the downward potential for precious metal could be limited in the middle of the cautious environment and uncertainty about the tariff measures of the US president, Donald Trump.
The dollar is strengthened while Trump starts a commercial war with tariffs. On Sunday, Trump imposed wide retaliation measures against Colombia, including tariffs and sanctions, after the South American country refused to allow the landing of two military planes that transported deported migrants. Trump said he will order an emergency tariff of 25% over all Colombian goods that enter the US, which will rise to 50% in a week. This holder weighs on the price of the merchandise called in USD.
Gold operators expect the US Federal Reserve (FED) to maintain interest rates without changes in their January meeting on Wednesday. The FOMC press conference will be observed closely as it could offer some clues about the Rate Road in the US in the World Economic Forum last week, Trump asked for an immediate cut of interest rates, causing the USD reached its lowest level in more than a month and supporting the price of gold. However, if Fed officials issue restrictive comments this week, this could drag the yellow metal without low performance.
FAQS GOLD
Gold has played a fundamental role in the history of mankind, since it has been widely used as a deposit of value and a half of exchange. At present, apart from its brightness and use for jewelry, precious metal is considered an active refuge, which means that it is considered a good investment in turbulent times. Gold is also considered a coverage against inflation and depreciation of currencies, since it does not depend on any specific issuer or government.
Central banks are the greatest gold holders. In their objective of supporting their currencies in turbulent times, central banks tend to diversify their reserves and buy gold to improve the perception of strength of the economy and currency. High gold reserves can be a source of trust for the solvency of a country. Central banks added 1,136 tons of gold worth 70,000 million to their reservations in 2022, according to data from the World Gold Council. It is the largest annual purchase since there are records. The central banks of emerging economies such as China, India and Türkiye are rapidly increasing their gold reserves.
Gold has a reverse correlation with the US dollar and US Treasury bonds, which are the main reserve and shelter assets. When the dollar depreciates, the price of gold tends to rise, which allows investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rebound in the stock market tends to weaken the price of gold, while mass sales in higher risk markets tend to favor precious metal.
The price of gold can move due to a wide range of factors. Geopolitical instability or fear of a deep recession can cause the price of gold to rise rapidly due to its condition of active refuge. As an asset without yield, the price of gold tends to rise when interest rates lower, while the money increases to the yellow metal. Even so, most movements depend on how the US dollar (USD) behaves, since the asset is quoted in dollars (Xau/USD). A strong dollar tends to keep the price of gold controlled, while a weakest dollar probably thrusts gold prices.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
