Gold prices dip on strong dollar and profit-taking
Gold prices dropped by over 1% on Friday, fueled by a stronger U.S. dollar and profit-taking in the wake of the metal’s recent surge amid expectations of U.S. interest rate cuts in September. Spot gold was down 1.7% at $2,404.34 per ounce by 1233 GMT, after hitting an all-time high of $2,483.60 earlier in the week.
Factors contributing to gold’s weakness
According to Zain Vawda, a market analyst at MarketPulse by OANDA, the decline in gold prices can be attributed to a combination of factors including a stronger U.S. dollar, rising U.S. yields, easing geopolitical tensions, and potential profit-taking ahead of the weekend. Vawda also noted that if prices close below $2,400, reaching $2,500 in the near-term could prove challenging.
Market expectations of a rate cut
The markets are currently pricing in a 98% chance of a rate cut by the U.S. Federal Reserve in September, as per the CME FedWatch Tool. In a low-interest rate environment, non-yielding bullion tends to attract investors, supporting gold prices. Fed Chair Jerome Powell’s comments on recent inflation readings have also contributed to market sentiment.
Insight into future gold price movements
Ricardo Evangelista, a senior analyst at ActivTrades, expects gold to remain supported above $2,400 in the near term. He also pointed out that if U.S. GDP data next week shows a slowdown in economic activity, gold could return to or hover around its record high from earlier in the week.
Impact of U.S. presidential election
Evangelista highlighted another factor that could influence gold prices – traders’ belief in a potential victory for U.S. presidential candidate Donald Trump in the November polls. A more protectionist global affairs and trade stance under a Trump presidency could bolster the dollar and impact gold prices.
Other metal prices
Spot silver fell 3.5% to $29.00 per ounce, platinum eased 0.8% to $960.10, and palladium lost 1.1% to $919.51, with all three metals heading for weekly declines. These movements indicate a broader trend in the precious metals market.
