Gold Dips as Dollar Strengthens Ahead of Fed Decision

27 Jan 2025 , 10:14 AM

While investors awaited additional signals on interest rate decisions from the U.S. Federal Reserve’s first meeting of 2025 later this week, gold prices marginally declined in early Asian hours on Monday as the dollar appreciated.

Spot gold was down 0.1% to $2,768.01 an ounce. At $2,772.70, U.S. gold futures fell 0.2%.

Due to the 0.2% increase in the dollar, gold became more costly for overseas buyers.

In their meeting on January 28 and 29, U.S. Fed policymakers are anticipated to maintain rates in the present range of 4.25% to 4.50%. However, the main focus will be on how the central bank responds to President Donald Trump’s initial actions, which are expected to influence the economy this year.

Last year, the Fed lowered the benchmark rate by a whole percentage point.

The Fed’s underlying belief that inflation will continue to climb steadily, albeit slowly, towards 2%, with a low unemployment rate, continuous hiring, and economic expansion, has been maintained by data since the Fed’s most recent meeting on December 17–18.

If Trump’s inflationary policies cause the Fed to keep interest rates higher for longer, gold’s allure as an inflation hedge may be lessened.

Meanwhile, when Colombia rejected two U.S. military planes carrying migrants who were being deported, Trump declared on Sunday that he would enact broad retaliatory measures against the South American nation, including tariffs and fines.

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