Gold is poised for its first weekly loss since January as investors cash in gains following a historic rally, pressured by a resurgent U.S. dollar and shifting expectations for Federal Reserve policy.
The precious metal, which hit record highs earlier this month, has retreated nearly 4% this week as robust U.S. economic data dims its appeal.
Fresh figures showing the U.S. economy expanded by 2.3% in Q4 2024, coupled with a 3.1% jump in durable goods orders, have bolstered the dollar to multi-week highs. This strength, alongside rising bets that the Fed may delay rate cuts amid sticky inflation, has undercut gold’s momentum. With higher interest rates typically lifting yields on bonds and other assets, non-interest-bearing gold struggles to compete.
Trade tensions add another layer of uncertainty. The Biden administration’s decision to retain tariffs on Mexican and Canadian imports, alongside a proposed 25% levy on European automobiles, risks reigniting inflation and slowing global growth. Analysts warn such measures could spur volatility, forcing investors to recalibrate portfolios.
Geopolitical risks loom, too. Progress in Ukraine-Russia peace talks might dampen gold’s safe-haven demand, though stalled negotiations could quickly reverse sentiment. Meanwhile, markets brace for today’s U.S. Personal Consumption Expenditures (PCE) report—the Fed’s preferred inflation gauge. A hotter-than-expected reading could extend gold’s slide, while softer numbers might stem losses.
“Gold’s pullback reflects a recalibration, not a collapse in confidence,” said a Singapore-based metals trader. “The macro puzzle—strong data versus trade and geopolitical risks—means volatility isn’t going away.”
For now, the metal’s fate hinges on whether the dollar’s rally persists and if central banks signal relief for rate-sensitive assets. With $2,300 per ounce now acting as resistance, traders await clues on whether this dip is a pause—or the start of a deeper correction.
