The dollar index (DXY) dropped by 0.16% on Monday, retreating from a three-week high, following a significant contraction in the US ISM manufacturing index, which fell to 47.9 in December, a decrease of 0.3 from the previous month and the most substantial drop in 14 months. The weaker manufacturing data combined with a stock market rally curtailed liquidity demand for the dollar.
On Saturday, US President Trump announced plans to temporarily “run” Venezuela following the US capture of President Maduro, which initially boosted safe-haven demand for the dollar. However, dovish signals from Federal Reserve officials led to market speculation of a potential 25 basis point rate cut during the upcoming FOMC meeting on January 27-28, further pressuring the dollar.
Precious metals saw significant gains, with February COMEX gold rising by 2.82% and March COMEX silver increasing by 7.94% due to heightened safe-haven demand amid geopolitical tensions in Venezuela and expectations of loose monetary policy from the Fed. Central bank demand remains robust, with China’s gold reserves rising to 74.1 million troy ounces and global central banks purchasing 220 metric tons of gold in Q3, a 28% increase from Q2.
