KARACHI: Gold prices were steady on Friday but remained on track for their steepest weekly drop in more than three years, weighed down by a surging US dollar and reduced expectations of aggressive Federal Reserve rate cuts.
Spot gold inched up 0.1% to $2,569.69 per ounce by 0308 GMT after sliding for five consecutive sessions. The precious metal has declined over 4% this week, marking its worst performance since 2020.
Gold prices touched a two-month low on Thursday, retreating more than $220 from last month’s record high. US gold futures also edged higher by 0.1%, trading at $2,574.50 per ounce.
Impact of a Stronger Dollar
The US dollar continued to strengthen in the wake of Donald Trump’s re-election victory, making gold more expensive for investors using other currencies. Analysts suggest this shift reflects expectations of tighter monetary policy under Trump’s administration in 2025.
“Higher interest rates increase the opportunity cost of holding gold, which is not yielding any returns,” noted Fawad Razaqzada, a market analyst at Forex.com.
Fed Chair Jerome Powell added to the market’s cautious outlook on Thursday, citing steady economic growth, a strong labor market, and persistent inflation as reasons to avoid rapid rate cuts.
Fed Expectations Shift
Market sentiment towards Federal Reserve policies shifted dramatically this week. According to the CME Fedwatch tool, the probability of a 25-basis-point rate cut in December dropped to 59% from 83% a day earlier.
However, some analysts believe that turbulence in Trump’s second term could drive demand for gold as a safe-haven asset. “While Powell’s comments could cap gains for gold, uncertainty around Trump’s policies may still attract investors,” said Matt Simpson, senior analyst at City Index.
Prospects for Rebound
Simpson anticipates that gold prices could rebound in the coming week, potentially retesting the $2,600 per ounce level, given a quieter US economic calendar. However, recent US producer price data from October indicated stalling progress in curbing inflation, raising concerns over economic stability.
Investors are closely watching US retail sales data, expected later in the day, along with remarks from several Federal Reserve officials, which may offer further insights into the direction of monetary policy.
Other Precious Metals
The decline wasn’t limited to gold. Spot silver rose marginally by 0.2% to $30.52 per ounce, platinum inched up 0.1% to $940.68, and palladium added 0.5% to $946.00. Despite minor gains on Friday, all three metals were headed for weekly losses. Source