Gold slumps as US dollar adds more than 1%

Gold bars

Gold prices tumbled today, Feb. 3, pressured by a stronger US dollar after US President Donald Trump imposed additional customs duties on imports from Mexico, Canada, and China, which could spark a global trade war.

April gold futures grew by 0.53%, or $14.9, to $2,820.10 per ounce at 10:24 am Makkah time, with spot prices also down 0.50% to $2,787.30 an ounce.

Similarly, March silver futures fell 0.82% to trade at $32 per ounce, in tandem with a 1.58% decline in platinum spot prices to $967.06 an ounce.

The new US administration imposed 25% tariffs on imports from Canada and Mexico and 10% on Chinese goods last weekend, claiming to protect domestic industries, force these countries to curb drug smuggling into the US, and clog the flow of illegal immigration across the borders.

As a result, the US dollar index, which gauges the greenback’s strength against a basket of six major currencies, jumped 1.17% to 109.64 points, fueling a rise in the cost of buying gold in other currencies.

Economists opposed the new Republican administration pursuing a protectionist trade policy against other nations as it may push inflationary risks to arise again after the Federal Reserve's efforts since 2022 to curb price hikes. This is especially after the Federal Open Market Committee expected to slow the pace of rate cuts in 2025.

Jigar Trivedi, Senior Analyst at Reliance Securities, told Reuters that Trump’s new tariff announcement was supposed to push gold higher as investors flocked to safe-haven assets for hedging.

Still, a stronger US dollar and expectations of a slowdown in the pace of interest rate cuts by the Fed added pressure on the precious metal, according to Trivedi.

While eyeing Trump’s trade agenda, investors are closely awaiting the release of the US jobs report next Friday. Expectations suggest the addition of 154,000 new positions in January, compared to 256,000 in December 2024.

This implies a slowdown in the US economy in terms of job creation, reflecting a cooler labor market. This in turn raises chances that the Fed would continue to ease monetary policy in the near term after last week’s decision to hold key rates steady.