Gold Heading for Worst Trading Week Since 2021: What’s the Reason?
- Gold prices steadied in Asian trade on Friday, but were on track for their worst weekly performance in over three years, as strong U.S. inflation data and less dovish signals from the Federal Reserve sparked doubts about further interest rate cuts.
- The yellow metal was also pressured by a risk-on rally following Donald Trump’s victory in the 2024 U.S. presidential election. Markets were also uncertain about the outlook for interest rates under a potential Trump administration.
- Spot gold rose by 0.2% to $2,569.47 per ounce, while December gold futures rose by 0.1% to $2,574.05 per ounce.
- Spot gold was down about 4.3% this week, marking its worst performance since June 2021. The yellow metal had initially tumbled from record highs after Trump’s election victory sparked a renewed risk appetite last week.
- Losses deepened this week as the dollar surged to its highest levels in a year amid growing uncertainty about the near-term outlook for interest rates.
- U.S. inflation data for October showed stability in both consumer and producer prices, while comments from Federal Reserve officials suggested that the central bank had become more cautious about cutting interest rates further.
- Federal Reserve Chair Jerome Powell said the strength of the U.S. economy meant the central bank could reconsider cutting rates at a faster pace. His remarks led traders to scale back expectations of a rate cut in December.
- Traders were pricing in a 61% chance of a 25-basis-point rate cut in December, down from an 85.7% chance seen on Thursday. CME Fedwatch data also showed a 39% chance that rates will remain unchanged.
- The prospect of higher-for-longer interest rates is a negative scenario for gold and other precious metals. Additionally, expectations of more inflationary policies under Trump have traders bracing for higher long-term rates.
- On the other hand, platinum futures rose by 0.3% to $946.70 per ounce, while silver futures gained 0.1% to $30.610 per ounce on Friday.
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