Gold prices experienced a notable decline on Thursday, falling by more than 1% to their lowest levels in over a week, as the U.S. dollar strengthened ahead of critical inflation data. Investors remained cautious, awaiting key economic indicators that could offer insights into the Federal Reserve’s future monetary policy decisions.
Gold Prices Slide as Dollar Gains Strength
In early trading, spot gold fell 1% to $2,889.13 per ounce, marking its lowest point since February 17. The precious metal had previously reached a record high of $2,956.15 on Monday, driven by safe-haven demand amid global uncertainties. Similarly, U.S. gold futures dropped nearly 1%, to $2,901.50 per ounce. The dollar index advanced by 0.2%, moving further away from its recent 11-week lows.
A stronger dollar typically increases the cost of gold for investors holding other currencies, dampening demand for the precious metal.
Investor Caution Ahead of Inflation Report
Market sentiment remains cautious as investors await the release of the Personal Consumption Expenditures (PCE) price index, a closely watched inflation gauge by the Federal Reserve. A recent Reuters poll suggests the PCE monthly index will likely remain unchanged at 0.3% from December 2024.
Traders are also focused on speeches from several Federal Reserve officials later in the day, with expectations that their remarks could provide more clarity on potential interest rate cuts. Current market expectations anticipate at least two rate reductions in 2025, with 55 basis points of easing already priced in.
Lukman Otunuga, a senior research analyst at FXTM, commented that any significant deviation in the rate cut expectations could trigger heightened volatility in gold prices.
Geopolitical Tensions Add to Market Pressures
In addition to inflation concerns, geopolitical and trade uncertainties have further pressured gold prices. U.S. President Donald Trump’s recent tariff remarks have sparked market jitters, with Trump proposing a 25% reciprocal tariff on European cars and other imports. He also suggested that new tariffs on Mexican and Canadian goods could take effect on April 2.
These uncertainties have driven up demand for the U.S. dollar, adding additional downward pressure on gold. Profit-taking following recent record highs has also contributed to the metal’s decline.
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