In Asian trading on Friday, gold prices experienced a decline, further retreating from record highs reached earlier in the week, as a sharp rise in the dollar, triggered by a surprise interest rate cut by the Swiss National Bank (SNB), exerted pressure on metal markets.
The surge in gold to record highs above $2,200 an ounce, driven by the Federal Reserve’s maintenance of its outlook for at least three interest rate cuts in 2024, was short-lived. The dollar rebounded sharply following dovish signals from other major central banks, leading to the retreat of the yellow metal.
Spot gold fell by 0.4% to $2,173.62 an ounce, while gold futures expiring in April dropped nearly 0.5% to $2,174.90 an ounce by 00:28 ET (04:28 GMT).
The primary factor pressuring gold prices was the significant gains observed in the dollar, with the dollar index reaching a three-week high above the 104 level. This surge in the greenback followed the SNB’s surprise rate cut and dovish signals from the Bank of England, leaving the dollar as the sole major high-yielding, low-risk currency.
Furthermore, signs of resilience in the U.S. economy, highlighted by an optimistic outlook from the Fed and strong purchasing managers index data, further bolstered confidence in the dollar. This sentiment weighed on metal markets, as investing in precious metals like gold does not offer direct yields.
The strength in the dollar is anticipated to cap any significant upside in bullion, at least until the Fed initiates interest rate cuts later this year. According to the CME Fedwatch tool, the central bank is expected to cut rates by 25 basis points in June.
Despite the current pressure, analysts at Citi foresee a potential rise in bullion prices later this year, setting a year-end price target of $2,300 an ounce for gold.
In addition to gold, other precious metals also experienced declines in Asian trade, relinquishing most of their gains made following the Fed’s announcement. Platinum futures fell by 0.7% to $905.10 an ounce, while silver futures slid by 1% to $24.758 an ounce.
Meanwhile, copper prices pulled back from 11-month highs amid growing concerns over China’s economic outlook, with three-month copper futures on the London Metal Exchange and one-month U.S. copper futures both experiencing declines of 1% and 1.2%, respectively. Despite these fluctuations, the outlook for copper markets remains tight, particularly as reports indicate that major Chinese copper refiners plan to reduce output this year.
