Gold prices retreated from record highs on Thursday, after hitting record highs in Asian trading. This decline was driven by profit-taking by investors, in addition to hawkish comments from US Federal Reserve Chairman Jerome Powell, which clearly impacted the market.
As of 07:40 GMT, spot gold was down 0.7% at $3,320.56 per ounce. Meanwhile, June gold futures fell 0.4% to $3,334.61 per ounce. Despite this decline, gold remains close to its all-time high of $3,356.32, reached earlier in the day.
Powell’s Statements: A Key Pressure Factor
The recent period has seen a significant rise in gold prices, supported by increased global demand, rising geopolitical concerns, and continued concerns about inflation. However, Powell’s recent statements clearly put pressure on the markets, as he confirmed that there are no imminent plans to cut interest rates.
Higher interest rates increase the opportunity cost of investing in gold, which does not generate a return. Higher interest rates also boost the value of the US dollar, making gold less attractive to foreign investors. These statements coincided with trade negotiations between the United States and Japan, which showed initial progress but added further uncertainty to the economic landscape.
Will gold continue to rise?
Despite the recent decline, analysts expect the fundamentals to continue supporting gold. This coincides with increasing global economic uncertainty and rising geopolitical tensions.
On the other hand, gold has enjoyed a strong start to 2025, with prices rising 19% during the first quarter, marking its best quarterly performance in 39 years. This performance was attributed to the imposition of US tariffs on imports, which prompted investors to turn to gold as a safe haven.
Gold Mining Companies: Promising Opportunities
In the mining sector, gold companies performed strongly during the last quarter. Genesis Minerals posted strong profits, while companies such as Evolution Mining and Ramelius Resources reported significant increases in cash flow.
These results were reflected in a 50% rise in the ASX Gold Index since the beginning of the year. Analysts believe that gold stocks remain undervalued, presenting attractive investment opportunities.
Gold prices continue to fluctuate between strong support and short-term challenges. In the long term, fundamental factors, such as demand from central banks and geopolitical concerns, are likely to continue to support the precious metal. However, US monetary policy decisions and shifts in global markets will continue to influence the overall price trend.
Escalating trade tensions support gold amid rising US retail sales
In a notable economic development, the US Census Bureau announced that retail sales jumped 1.4% in March. This increase is highest in more than two years, exceeding market expectations of a 1.3% increase. This followed a revised February reading of 0.2%. This data reflects resilience of consumer spending despite rising inflationary pressures.
In this context, Federal Reserve Chairman Jerome Powell stated that the bank is not inclined to cut interest rates in the near term. He attributed this to potential inflationary pressures stemming from President Donald Trump’s aggressive trade policies. Specifically, he noted that new tariffs could increase import costs, raising domestic prices and making it harder to contain inflation.
Gold, on the other hand, continued to benefit from this trend. Despite some temporary price pressure, investors continue to favor gold as a safe haven amid these tensions. The escalation between Washington and Beijing has fueled global fears of a broad economic slowdown. Trump recently imposed additional tariffs, prompting China to retaliate with 125% tariffs on US goods and impose restrictions on rare earth exports.
Long-Term Outlook: Will Gold Reach $4,000?
These steps exacerbated uncertainty in global markets. The United States also imposed new restrictions on the export of artificial intelligence chips to China, further complicating the trade situation. China, for its part, affirmed that it would not yield to pressure and expressed its willingness to confront without hesitation. This harsh tone deepened fears of an escalating economic conflict between the world’s two largest economies.
Amid this environment, Asian stock markets showed a marked improvement on Thursday. However, this improvement, along with some dollar buying, temporarily curbed investor appetite for gold. Nevertheless, gold maintained a significant portion of its gains, benefiting from expectations that the Federal Reserve may reconsider its monetary stance if the trade escalation continues and negatively impacts growth.
Investors, for their part, are still closely monitoring the possibility of the Federal Reserve cutting interest rates next June. Any hint of a change in monetary policy could push gold prices further upward. A rate cut reduces the attractiveness of the dollar and increases demand for non-yielding assets such as gold.
Meanwhile, traders are awaiting important economic reports in the coming days. These reports include weekly unemployment data, the Philadelphia Fed Manufacturing Index, and housing market developments. Markets are also closely monitoring any new comments from Federal Reserve officials. These factors combined could move the market in the short term and affect the outlook for gold and the dollar.
After the recent surge, talk has increased about the possibility of gold reaching $4,000 per ounce. Some experts believe this level is not unlikely, but could be achieved if current economic conditions persist.
Cameron Good, a gold fund manager, expressed confidence in this trend. Good believes that the weak US dollar and strong demand from central banks are pushing gold to unprecedented levels..
ETFs are reviving their activity
For example, China holds a relatively small percentage of its foreign reserves in the form of gold. In contrast, other developed countries hold much higher percentages. Therefore, Good believes there is plenty of room for China and others to increase their gold purchases in the coming period. Moreover, exchange-traded funds (ETFs) have begun to recover. Chinese funds, in particular, recorded strong inflows in April, increasing their holdings by 29 tons in just two weeks. This trend demonstrates that individual investors are once again interested in gold as a safe haven.
If these factors continue to accumulate, gold could reach $4,000 in the coming period. This would also push the price, denominated in Australian dollars, higher, jumping from $5,100 to over $6,300 per ounce.
With average gold production costs in Australia and New Zealand at $2,051 per ounce, any further rise would expand profit margins for mining companies. This, in turn, enhances the attractiveness of investing in gold stocks and increases the likelihood of capital flowing into the sector.
