Global markets observe a 1.9% drop in gold; Analysts maintain year-end bullish outlook
Gold prices experienced a second consecutive week of declines on Friday, influenced by a robust U.S. dollar and rising Treasury yields following hawkish comments from Federal Reserve Chair Jerome Powell.
As of 0758 GMT, spot gold saw a 0.2% decrease, reaching $1,954.60 per ounce, hitting its lowest point since October 18. Simultaneously, U.S. gold futures fell 0.5% to $1,959.70. The precious metal has slid by 1.9% this week, marking the most significant weekly decline in over a month.
Hugo Pascal, a precious metals trader at InProved, noted, “Gold has been consolidating below $2,000 since the beginning of November, after getting ahead of itself. However, I remain bullish for the year-end as long as it stays above $1,900.”
The decline in gold prices is attributed to Federal Reserve officials, including Powell, expressing uncertainty about the adequacy of U.S. interest rates to combat inflation. Powell’s comments led to a rise in the benchmark 10-year U.S. Treasury yield from more than one-month lows, reducing the attractiveness of non-yielding bullion for investors.
Traders adjusted expectations for the Fed‘s first rate cut, shifting it to June of next year from the previous estimate of May. Higher interest rates increase the opportunity cost of holding gold, which does not yield interest.
Simultaneously, the U.S. dollar index is heading for its most substantial weekly gain in over three months, making gold more expensive for holders of other currencies.
Ilya Spivak, head of global macro at Tastylive, emphasized the technical aspect, stating, “On the technical front, $1,940 looks a very important support level for gold. If we break that, we’re looking at another test at $1,900.”
In the broader precious metals market, palladium experienced a 1.7% slip to $975.19 per ounce, marking its lowest point since 2018 and heading for its worst week in 11 months. Platinum fell 0.2% to $857.58, signaling its poorest week since mid-June 2021, while silver recorded a 0.1% decrease, settling at $22.61.
