Gold Slips as Trump Tariff Threats Boost Dollar

Gold prices are heading for a weekly loss as Trump's tariff threats have bolstered the US dollar, making gold less attractive to investors. The precious metal has been on a rollercoaster ride this week, with prices surging to new highs amid uncertainty and inflation concerns, only to retreat as the dollar strengthened.



The US dollar index, which measures the performance of the greenback against a basket of six major currencies, rose 0.61% on Thursday, fueling bullion's rally. The US Treasury bond yields also plunged, although the latest US inflation report on the producer's side showed the disinflation process has stalled. The positive note in the US economic docket is that the jobs market is still strong after the number of Americans filing for unemployment benefits dipped last week, revealed the US Department of Labor.

Given the uncertainty surrounding US trade policies and a possible reacceleration of inflation, XAU/USD could test higher prices in the short term. In addition, as revealed on February 11, increased demand from central banks could exert upward pressure on bullion prices. The World Gold Council (WGC) revealed that central banks purchased over 1,000 tons of gold for the third consecutive year in 2024. Following Trump's electoral victory, purchases by central banks surged by more than 54% year-over-year to 333 tons, according to WGC data.

However, the physical gold market has shown signs of weakening as India's market continues to trade at a discount. The latest trade data shows that gold shipments to India tumbled to 31 tons, good for a 46% month-over-month decline and the lowest since March 2024. Meanwhile, China's market continues to toy with a discount. Preliminary data suggests net purchases have slowed, with Türkiye adding 5.4 tons in January and 0.6 tons in February so far.

Experts have, however, predicted that the gold price rally is likely to continue. Market focus will shift to the Federal Reserve's interest rate stance, with minutes of its January policy meeting due later on Tuesday. "Any bearish impact (on gold) from today's FOMC minutes release is expected to be short-lived," Vawda said.

In conclusion, gold prices are heading for a weekly loss as Trump's tariff threats have bolstered the US dollar, making gold less attractive to investors. Despite signs of weakening in the physical gold market, experts predict that the gold price rally is likely to continue. Investors should keep an eye on the Federal Reserve's interest rate stance and the broader economic dynamics to make informed decisions about their gold investments.