Gold continues its sharp decline during trading today, Friday, as it is heading towards recording its worst week in more than three years. This significant decline came as a result of the strength of the US dollar in the markets, amid expectations of a possibility of reducing interest rates by the US Federal Reserve in the near future.
During this week, the US dollar maintained a strong upward path, after Donald Trump won the elections. This rise led to an increase in the cost of gold bullion for holders of other currencies, making gold less attractive as a safe investment. This trend led to a reduction in demand for the yellow metal, which reinforced the decline in its prices.
The market analyst indicated that the weakness of gold is mainly due to expectations that indicate a slowdown in reducing interest rates in 2025 under the Trump administration. These expectations may affect performance of gold in coming months, as the yellow metal often benefits from lower interest rates.
while expectations of stable or increased interest rates may push it to decline.
Financial markets are closely monitoring any changes in the US Federal Reserve’s monetary policy, which may have a significant impact on the movement of gold prices. At same time, there are other factors that affect gold prices.
such as global market volatility and economic developments in various countries.
Gold is expected to continue to be pressured in the coming weeks if the dollar continues to strengthen. Therefore, gold may remain under selling pressure from investors who prefer assets that offer higher returns in an economic environment that is witnessing a recovery in financial markets.
However, some experts remain optimistic about the long-term future of gold, noting that economic crises and inflation may reignite demand for gold as a safe haven.
Higher interest rates affect gold prices
Higher interest rates continue to increase the opportunity cost of holding gold. Highe interest rates lead investors to prefer assets that offer better returns than bullion. At the same time, Jerome Powell, Chairman of the Federal Reserve, indicated that continued economic growth and a strong labor market.
in addition to high inflation, justify caution in cutting interest rates quickly. This statement added further pressure on gold, as investors prefer assets that offer more competitive returns in light of this economic situation.
According to the tool that tracks interest rate expectations, provided by the Investing Saudi platform, markets expect a 59% chance of a 25 basis point rate cut in December. This probability was higher the previous day, when it reached 83%. These expectations reflect a state of anticipation in financial markets regarding the Federal Reserve’s upcoming monetary policy.
For his part, Matt Simpson, senior analyst at City Index, indicated that Powell’s comments may limit gold’s gains as the new year approaches. However, he added that if political turmoil continues under President Trump, gold may benefit from investment flows that favor safe havens in times of instability.
Despite the pressures facing gold due to interest rate policies, Simpson believes that the precious metal may witness a recovery if the next week in the United States passes without major economic events. With few expected economic data, gold may have a chance to recoup some of its losses. Gold is expected to retest the $2,600 per ounce level if these conditions are met.
These expectations indicate that gold may witness some volatility in the coming period. Despite the current economic conditions, some still see gold as a safe haven amid global challenges. Gold remains a preferred choice for some investors looking for protection in times of economic crisis.
US producer prices rise, pressuring markets
Data released on Thursday showed that producer prices in the United States rose in October, reflecting a pause in progress towards reducing inflation. This increase suggests that the Federal Reserve’s efforts to curb inflation may struggle to achieve tangible results in the short term. With prices continuing to rise in the productive sector, the economic situation remains in a state of suspense.
Investors are awaiting the US retail sales data, which is expected to be released today at 16:30 Riyadh time. In addition, there will be comments from several Federal Reserve officials later in the day. These statements may be pivotal in guiding financial markets and determining the direction of monetary policy in the coming period.
Gold and dollar price movement
Spot gold prices fell by 0.1% to reach $ 2,562.61 per ounce, recording a decline of more than 4% since the beginning of the week. In the previous session, gold hit a two-month low, falling more than $ 220 from its record peak reached last month. This decline reflects the continued pressure on gold due to the rise in the US dollar and rising interest rates.
On the other hand, gold futures fell by 0.2%, recording $2,567.10 per ounce. In contrast, the dollar index stabilized at 106.57 points. A strong dollar is one of the main factors negatively affecting gold prices.
as it makes the precious metal more expensive for investors holding other currencies.
Other Metals Performance
Other precious metals also witnessed a decline in prices. Silver fell by 0.3% in spot transactions, reaching $30.37 per ounce. In contrast, platinum recorded a slight increase of 0.1% to reach $940.45 per ounce. As for palladium, it witnessed a rise of 0.5% to reach $945.75 per ounce. Despite these slight increases, the three metals are heading towards recording weekly declines.
Market Outlook
Many analysts expect pressure on gold and other metals prices to continue if the dollar remains strong and interest rates rise. With inflation data in the US continuing to show signs of slowing, it may be difficult for gold to recover in the near term. Any changes in US monetary policy or new economic data could help determine the path of prices in the coming weeks.
Markets are eagerly awaiting any new indicators that may help ease the pressure on gold and other metals.
