Gold prices fell in European trade on Monday for the first time in three sessions away from a record high on profit-taking, as the dollar rallies against major rivals. 

The losses are stymied by mounting risk aversion in the markets as haven demand increases, with global trade tensions spiking after the US imposed tariffs on Canada, Mexico, and China.

Prices

Gold prices fell 0.95% today to $2772 an ounce, with a session-high at $2804.

On Friday, gold rose 0.15%, hitting a record high at $2817 on strong investment demand.

Gold rallied 1% last week, marking the fifth weekly profit in a row on haven demand.

US Dollar

The dollar index rose 1.3% on Monday, expanding the gains for the fifth straight session and hitting a three-week high at 109.88 against a basket of major rivals.

The gains came as US President Donald Trump executed his threats of imposing tariffs on Canada, Mexico, and China, which could boost inflationary pressures once again in America.

Trump’s Tariffs

Trump said the 25% tariffs on Canada and Mexico, and the 10% tariff on China, are a response to illegal immigration and the drug trade.

Both Canada and Mexico, the two biggest US trading partners, vowed retaliation, while China said it’ll challenge Trump’s tariffs at the World Trade Organization.

SPDR

Gold holdings at the SPDR Gold Trust rose 0.58 tons on Friday to a total of 864.77 tons.

The euro lost 1.5% in European trade on Monday against the US dollar, sharpening losses for the fifth straight day and plumbing a three-week trough on risk aversion as the US tariff crisis escalates.

The US administration imposed 25% tariffs on Canada and Mexico, and a 10% tariff on China starting February, with all countries vowing retaliation.

ECB policymakers also hinted at continuous policy easing this year, which paves the way for a likely ECB rate cut in March, undermining the euro further.

The Price 

The EUR/USD pair fell 1.5% to $1.0210, the lowest since January 13, with a session-high at $1.0270.

The euro lost 0.3% on Friday, the fourth loss in a row on the prospects of a March ECB rate cut.

It lost 1.3% last week against the greenback, the first loss in three weeks, and the heftiest since November. 

Trump’s Tariffs

Trump said the 25% tariffs on Canada and Mexico, and the 10% tariff on China, are a response to illegal immigration and the drug trade.

Both Canada and Mexico, the two biggest US trading partners, vowed retaliation, while China said it’ll challenge Trump’s tariffs at the World Trade Organization.

Trump sowed confusion in the first two weeks of his administration on the question of tariffs as he kept delaying the step, with some estimating it might just be a negotiating tactic. 

But now with the official implementation, it becomes the most protectionist move that a US President has undertaken in nearly a century.

As expected, the European Central Bank cut interest rates by 25 basis points this week to 2.9%, the lowest since December 2022, and the fifth such cut since the start of the current policy easing cycle in June 2024.

The bank said the rate cut decision is based on the latest analysis of inflation outlook and the impact of the monetary policy.

The ECB noted that inflation has achieved noticeable improvement, and will likely return to the 2% medium-term target this year.

Lagarde 

ECB President Christine Lagarde said the decision to cut rates is linked to the latest eurozone data and especially inflation.

Lagarde said that inflation has started to dip considerably and is moving sustainably towards the target, however the monetary policy overall remains restrictive. 

European Rates

Media sources said that ECB policymakers expect an additional rate cut at the March meeting. 

The current market pricing for an ECB 0.25% rate cut in March stood at 85%. 

The Australian dollar skidded in Asian trade to five-year lows against the US counterpart, resuming losses as US President Donald Trump launched his dreaded trade war. 

The US administration imposed 25% tariffs on Canada and Mexico, and a 10% tariff on China starting February, with all countries vowing retaliation.

The Aussie is also pressured by the reduction of inflationary pressures on the Reserve Bank of Australia, which boosts the odds of an Australian rate cut in February. 

The Price

The AUD/USD pair fell 2% today to 0.6088, the lowest since April 2020, with a session-high at 0.6170.

The aussie rose less than 0.1% on Friday against the US dollar, the first profit in five days. 

It lost 1.65% last week, the first weekly loss in three weeks as China faced US tariffs, which could impact Australia as its biggest trading partner.

Trump’s Tariffs

Trump said the 25% tariffs on Canada and Mexico, and the 10% tariff on China, are a response to illegal immigration and the drug trade.

Both Canada and Mexico, the two biggest US trading partners, vowed retaliation, while China said it’ll challenge Trump’s tariffs at the World Trade Organization.

Trump sowed confusion in the first two weeks of his administration on the question of tariffs as he kept delaying the step, with some estimating it might just be a negotiating tactic. 

But now with the official implementation, it becomes the most protectionist move that a US President has undertaken in nearly a century.

Australian Rates

Last week’s data showed Australia’s core inflation slowed down to the RBA’s medium-term targets.

Following the data, the odds of an RBA 0.25% rate cut in February rose from 55% to 80%.

Ethereum rose on Friday and bucked the trend of other cryptocurrencies, which were dominated by negative performance due to a weakened risk appetite. 

Earlier US data showed personal spending rose 2.6% y/y in December as expected, after a 2.4% rise in November. 

The White House announced today that increased tariffs on Mexican and Canadian imports will take effect tomorrow, February 1st. 

Otherwise, Fed official Michelle Bowman stated that more efforts are needed to bring inflation towards 2%, adding that she wants to see a notable dip in inflation before resuming rate cuts.

Ethereum 

On trading, ethereum rose 2% on Coinmarketcap as of 20:35 GMT to $3320, with a weekly loss of 0.4%.