XAU/USD Slides Following Trump’s Threats to BRICS to Defend USD

Gold prices fell on Monday after President-elect Donald Trump threatened the BRICS nations with 100% tariffs if they attempt to replace the US dollar with their own currency. This warning boosted the US Dollar, which typically weighs on Gold prices since the metal is primarily priced and traded in USD. Despite this, geopolitical risks continue to support safe-haven demand for Gold.

Gold (XAU/USD) fell to the $2,640s on Monday due to a stronger US Dollar. However, the downside is limited as elevated geopolitical risks drive continued demand for the precious metal.

Trump’s comments about imposing 100% tariffs on the BRICS trading bloc if they proceed with plans to replace the USD with their own currency caused Gold to pull back at the start of the trading week. His remarks strengthened the US Dollar, negatively impacting Gold prices.

Gold weakened on Monday after Trump issued a warning to the BRICS nations, stating he would impose 100% tariffs if they move forward with plans to replace the US Dollar with their own currency. Trump posted on Truth Social that the US requires a commitment from these countries not to create a new BRICS currency or back any other currency to replace the USD, or they will face 100% tariffs and lose access to the US economy.

The BRICS nations, including Brazil, Russia, India, China, South Africa, Egypt, Iran, the UAE, and Ethiopia, have been reducing their reliance on the USD, using their own currencies instead. There have been suggestions that they might develop a Gold-backed BRICS currency for trading purposes, replacing the USD altogether. Some BRICS countries, like China and India, have been hoarding Gold, possibly to launch a Gold-backed currency.

Trump’s warning threatens to derail these plans if BRICS members fear the fallout of a global trade war with the US, which could also weigh on Gold prices.

On the other hand, Gold continues to benefit from elevated geopolitical risks, driving safety inflows and countering the negative impact of Trump’s comments. Despite a ceasefire agreement last week, there have been reports of Israeli military drone strikes on the Syrian border and in Gaza, adding to regional instability. In Syria, civil war has erupted, with Turkish-backed rebel forces taking Aleppo. Meanwhile, French government bonds are selling off amid increased political risk as the government tries to pass a controversial budget.

Technical Analysis: XAU/USD is trading within a sideways market along a major trendline. The short-term trend is sideways, and the chart suggests a potential move lower. A break below $2,605 (November 26 low) could lead to further declines towards the range lows in the $2,530s. The MACD indicator is crossing below its red signal line, providing a sell signal and supporting the bearish near-term outlook.