Gold prices slipped on Monday as the dollar regained grounds after US President Donald Trump’s brief imposition of tariffs on Colombia.
The move towards tariffs, even if temporary, bolstered the dollar’s value, consequently exerting downward pressure on the price of gold.
A stronger dollar makes commodities priced in the greenback more expensive for overseas buyers, thereby limiting demand.
At the time of writing, the most-active April gold contract was down 0.6% around $2,790 per ounce.
Trump’s trade threats
“Gold buyers turn cautious heading into a big week, with the central focus on US President Donald Trump’s trade policies and the US Federal Reserve (Fed) policy announcements,” Dhwani Mehta, analyst at FXstreet, said in a report.
On Sunday, President Trump slapped a 25% tariff on all Colombian imports, which would be escalated to 50% in a week after the South American country refused to allow two military planes carrying deported migrants to land as part of the new US administration’s immigration crackdown.
In a development late on Sunday, Trump had decided to temporarily suspend the proposed tariffs on Colombian imports.
This decision came in the wake of a proposal put forth by Colombian President Petro, which involved utilising Colombia’s presidential aircraft for deportation purposes and accepting deportees back into the country.
The move signifies a potential breakthrough in the ongoing diplomatic standoff between the two nations, offering an interim solution to the trade dispute.
While the tariffs have been put on hold, it remains to be seen whether this development will lead to a more permanent resolution and improved relations between the US and Colombia.
Mehta said:
Later in the day, Trump’s tariff plans will continue to drive risk sentiment, eventually impacting the Greenback and the Gold price without top-tier US economic data releases.
Gold prices coming off last week’s steep gains
Gold prices experienced a surge of nearly 3% last week, driven by a confluence of factors.
The February gold contract on COMEX rose to multi-month high on Friday, just short of the record high of $2,790 per ounce.
President Trump’s vocal demands for a rate cut by the Federal Reserve exerted downward pressure on the US dollar, making gold more appealing to investors holding other currencies.
Simultaneously, market sentiment was influenced by the anticipation of a gradual and measured implementation of US tariffs.
This approach, as opposed to a sudden and sweeping imposition, alleviated concerns of an immediate and severe trade war, contributing to a more stable market environment and bolstering investor confidence in gold as a safe-haven asset.
Analysts at ING Group, said in a note
Although renewed USD strength this morning following escalation between the US and Colombia is providing some headwinds to gold in early morning trading.
Copper falls
Copper prices experienced a decline on Monday due to multiple contributing factors.
The rebound of the US dollar exerted downward pressure on copper.
Additionally, lingering uncertainty surrounding the trade policies of the Trump administration, particularly with regards to tariffs, contributed to a sense of caution among investors in the copper market.
This uncertainty regarding potential trade barriers and their impact on global economic growth further weighed on the price of the red metal.
“Trump’s softer tone towards China also pushed copper and other base metals higher last week,” ING analysts said.
Copper climbed to a two-month high above $9,300 per ton in Friday’s session after Trump’s comments had eased trade concerns with China, at least for now, the analysts added.
At the time of writing, the three-month copper contract on the London Metal Exchange was more than 1% down at $9,155 per ton.
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