U.S. gold futures dropped 0.4% on Monday, with investors awaiting the Federal Reserve's first meeting of 2025 for insights on interest rate trends.
The US dollar index briefly rose after U.S. President Donald Trump announced plans to impose tariffs and sanctions on Colombia. However, now the US Dollar Currency Index (DXY), which tracks the dynamics of the dollar against six currencies (euro, swiss franc, yen, canadian dollar, pound sterling and swedish krona) is trading at 107.27, with a decrease of 0.15%.
"The dollar is likely driving gold, but safe-haven demand amid U.S.-Colombia trade tensions may limit losses Uncertainties around trade measures could support further gold price gains," said IG market strategist Yeap Jun Rong.
Gold is seen as a hedge against geopolitical risks and inflation, and it typically performs well in low-rate environments since it doesn’t yield interest.
Investors are also focused on the Fed's January 28-29 meeting. While rates are expected to remain unchanged, attention will be on how the central bank responds to Trump's recent actions. Recent data supports the Fed's view that inflation is gradually moving toward its 2% target, with low unemployment and steady economic growth.
Meanwhile, the Hong Kong Census and Statistics Department data showed that net gold imports to China (the world's largest consumer of gold) through Hong Kong in December fell by 84% compared to November, to 5.26 metric tons. In November, imports totaled 33,074 metric tons.