Bullion dropped by almost 1% to below US$2,780 a dollar, although was still fairly close to a record high reached on Friday.
A gauge of the US currency jumped the most in almost three months on an intraday basis.
The inflationary impact of tariffs between the world’s biggest economies may keep borrowing costs elevated, a headwind for gold that doesn’t offer any interest, while a rising dollar makes it pricier for many buyers.
“Those dynamics are overwhelming haven demand for now,” said Christopher Wong, a strategist at Oversea-Chinese Banking Corp, adding that an uptick in price pressures may impact the Federal Reserve’s easing cycle.
“But if trade tensions intensify with more tit-for-tat measures, then we may start to see demand for gold pick up again,” Wong said.
The US announced tariffs of 25% on goods from Canada and Mexico, and 10% on those from China, set to take effect Tuesday.
Canadian energy imports will face a 10% levy.
“Ottawa unveiled a 25% counter-tariff on US goods, Mexico pledged retaliatory actions and Beijing issued a statement vowing “corresponding countermeasures”.
Trump has also threatened tariffs against the EU, which said it would respond firmly.
A global trade war would be a major headwind for growth, force a reorganisation of global supply chains, and threatens to roil financial markets.
While gold would typically benefit from haven demand in such a scenario, moves in the dollar and the interest-rate outlook are offsetting those pressures.
Some of the impact may already be priced in, with the metal rising almost 6% so far this year, following a 27% rally in 2024.
“The strong dollar could be a near-term headwind for gold,” said Charu Chanana, a strategist at Saxo Capital Markets Pte Ltd.
“However, the long-run impact of tariffs is likely to be dollar-negative as long-term trade protectionism could erode US economic dominance,” Chanana said.
Spot gold declined 0.9% to US$2,777.54 an ounce as of 12.04pm in Singapore, after climbing 1% last week.
The Bloomberg Dollar Spot Index rose 1.1%, after advancing 1% last week.
Silver, platinum and palladium all dropped by more than 1%.