Gold braced for worst six-month weekly decline
Gold Prices Plunge on Friday, Weekly Drop Biased Towards Six-Month Low
Friday saw a plunge in gold prices, steering the precious metal towards its steepest weekly decline in six months. Spot gold was down 0.8%, plummeting to $3,213.56/oz at 4.29am GMT.
This week's hefty loss of 3.3% indicates a bearish trend for the coveted metal, marking its worst weekly performance since November 2024. US gold futures echoed this downturn, falling 0.3% to $3,217.20/oz.
Fueling the descent, the mighty greenback gained 0.4%, gearing up for its fourth straight weekly ascent. This surge made gold, priced in US dollars, a costlier proposition for non-native buyers.
The declining gold prices were largely a consequence of thawing US-China trade tensions. According to Ilya Spivak, the head of global macro at Tastylive, "Gold prices confronted rough selling pressure this week as market celebrations abounded with a de-escalation in the US-China trade [conflicts]."
The United States and China recently officially agreed to temporarily slash the tit-for-tat tariffs imposed in April, indicating a tentative de-escalation in their trade dispute.
Concurrent economic data revealed that U.S. producer prices slumped unexpectedly in April, and retail sales growth slowed significantly, contributing to a less conducive environment for gold. Consumer prices reportedly rose less than anticipated in April as well.
In a more positive note, US Federal Reserve Governor Michael Barr declared the US economy to be on firm ground, with inflation gradually approaching the central bank's 2% target. Nevertheless, he expressed concerns about the implications of trade policies on the economic outlook.
Current market predictions indicate that investors anticipate 57 basis points of rate cuts this year, with potential easing starting from September. Gold, often considered a refuge in times of economic and political uncertainty, flourishes in a low-interest-rate environment.
Tim Waterer, the chief market analyst at KCM Trade, reassured this development, stating, "While gold prices have tumbled this week, the constant appeals by buyers affirm that the precious metal remains a preferred asset with the global growth and inflation prospects still appearing cloudy."
Other precious metals felt the pinch too. Silver dropped nearly 1%, slipping to $32.37/oz, while platinum and palladium diminished by 0.5% and 1.2%, respectively.
[1] Gold prices fell from a recent peak of over $3,400 per ounce to around $3,175.87, marking a decline over $225 from the May highs.[2] Weakness in the housing construction sector eroded investor confidence in gold.[3] Gold prices dropped as the geopolitical environment calmed.[4] Some technical market indicators showed signs of exhaustion in the recent recovery, causing traders to offload gold.[5] Lower U.S. inflation and US-China trade de-escalation decreased the appeal of gold as a safe haven.
[1] The recent decline in gold prices, which dropped from a peak of over $3,400 per ounce to around $3,175.87, was biased towards a six-month low due to a combination of factors affecting global markets.
[2] The weakness in the housing construction sector led to a loss of investor confidence in gold, contributing to the precious metal's descent.
[3] As the geopolitical environment calmed, retail investors and institutions involved in the finance industry shifted focus from safe-haven assets like gold, causing prices to drop.
[4] Lower U.S. inflation and the de-escalation of trade tensions between the United States and China have also impacted the appeal of gold as an investment, as these developments suggested economic stability, potentially deteriorating the demand for gold in retail and the broader industry markets.
[5] Some technical market indicators showed signs of exhaustion in the recent recovery, leading traders to offload gold positions, further exacerbating the decline in gold prices.
