The U.S. dollar weakened and gold prices surged on January 20, following President Donald Trump's inauguration, as markets reacted to his initial approach to trade policies.

Dollar Index Drops Sharply

The Dollar Index, which measures the greenback against six major currencies, fell 1% to 108.28—its steepest drop since August 2024.

This decline reflects relief among investors as President Trump refrained from imposing new import tariffs on his first day in office. Analysts noted a more cautious tone compared to his campaign rhetoric, where he pledged to impose tariffs of 10-20% on all imported goods, with rates as high as 60-100% on Chinese products and 25% on goods from Canada and Mexico.

"Investors are still bracing for sudden policy shifts under Trump's administration, as volatility is likely to become the norm. His protectionist trade agenda remains intact, with the question being how aggressively he will pursue it," said Boris Kovacevic, a macro strategist at Convera.

Gold Prices Surge

Gold prices rose sharply, climbing more than $20 from last week to $2,725 per ounce. The decline in the Dollar Index bolstered gold’s appeal to non-U.S. buyers.

Trump’s protectionist trade policies are also expected to stoke inflation, a scenario that often benefits gold as a hedge.

Oil Prices Feel the Pressure

Meanwhile, crude oil prices came under pressure following Trump's announcement of plans to maximize domestic oil and gas production by declaring a national energy emergency.

"The United States will once again become a dominant producer, and we possess something no other producing nation has: the largest reserves of oil and natural gas on Earth," Trump said during his inaugural address.

As a result, Brent crude dipped 0.02% to $80.10 per barrel, while U.S. West Texas Intermediate (WTI) fell as much as 1.5% to $76.74 per barrel.

While markets remained cautious, Trump's early moves provided insights into the potential economic and trade policies that may shape his administration's approach in the coming years.

(Source: Reuters)

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