Jamie Spencer
Gold prices fell over 1% on Friday, marking their steepest weekly decline since November, as the U.S. dollar held close to two-week highs. The dip followed inflation data that matched expectations, leading to speculation that the Federal Reserve may take a cautious approach to further rate cuts.
Gold and Dollar Dynamics
Spot gold dropped 1.3% to $2,840.25 an ounce by mid-morning, while U.S. gold futures fell 1.5% to $2,852.40. This capped a 3.2% weekly loss for bullion, the sharpest since November. The dollar index (.DXY) also posted a weekly gain, making gold more expensive for international buyers.
“I think the main element impacting the gold and silver markets is the profit-taking in week-long liquidation and the strong U.S. dollar index,” said Jim Wyckoff, a senior market analyst at Kitco Metals.
Inflation Data and Federal Reserve Expectations
The Personal Consumption Expenditures (PCE) price index rose 0.3% in January, matching analyst expectations. The inflation data supported the narrative that the Federal Reserve might maintain a cautious stance on rate cuts, keeping pressure on gold prices.
“The pricing for Fed expectations overall didn’t really materially move. Ultimately it wasn’t all that much of a driver for gold prices,” explained Daniel Ghali, commodity strategist at TD Securities.
Futures traders continued to bet on a rate cut by June, reflecting market sentiment that the Fed may ease monetary policy if economic conditions soften.
Trump’s Tariff Plans and Market Reactions
Gold’s safe-haven appeal remained underpinned by concerns over President Donald Trump’s proposed tariffs. Trump announced that 25% tariffs on Mexican and Canadian goods will take effect on March 4, with an additional 10% duty on Chinese imports.
However, gold prices were pressured by profit-taking and a stronger dollar, despite underlying geopolitical uncertainties.
“Stock market losses have stoked deleveraging pressure in gold, perpetuating the sell-off from Monday’s record high,” said Peter Grant, vice president and senior metals strategist at Zaner Metals.
Other Precious Metals Also Decline
The decline wasn’t limited to gold; other precious metals also saw losses:
- Spot silver fell 0.9% to $30.97 an ounce.
- Platinum dropped 1.1% to $938.50.
- Palladium slipped 1.5% to $906.
All three metals appeared set for monthly declines, reflecting the broader weakness in precious metals markets.
Gold’s Outlook Amid Economic Uncertainty
Despite the recent drop, gold is still on track for a second consecutive monthly gain, supported by safe-haven demand driven by economic uncertainties and geopolitical tensions. However, the strong dollar and profit-taking are likely to continue influencing gold’s short-term movements.
Investors are closely watching Federal Reserve policy signals and Trump’s tariff decisions, which could have significant impacts on both gold and broader financial markets in the coming weeks.
