Gold prices fell sharply this week, losing more than 3% — marking their worst weekly drop since November 2024. A temporary trade truce between the U.S. and China, alongside a strengthening dollar, prompted investors to pull away from safe-haven assets like gold.
By mid-morning Friday, spot gold was down over 1%, trading at $3,210.19 per ounce, while U.S. futures were at $3,213.60. The drop was further fueled by Donald Trump’s recent visit to Saudi Arabia and the UAE, where his talks on AI and energy policy raised new questions about future geopolitical developments and potential shifts in trade strategy.
Just weeks ago, the U.S. had threatened higher tariffs on Chinese imports. But on Monday, Washington backed off and agreed with Beijing to temporarily suspend retaliatory tariffs. Markets interpreted this as a signal to rotate out of defensive assets like gold and into riskier investments.
The result was immediate. Market optimism rose, but gold suffered. According to Nitesh Shah, a commodity strategist at WisdomTree, the week’s positive tone in trade discussions and the dollar’s strength both weighed heavily on gold.
The U.S. dollar index remained firm and is set to mark its fourth consecutive weekly gain, making gold less attractive to foreign buyers as it becomes more expensive in other currencies. This shift ended a bullish month for gold, which had previously hit a record high of $3,500.05 in April due to central bank purchases and inflation fears.
However, the latest U.S. economic data showed signs of a cooling economy, which led traders to increase bets on the Federal Reserve cutting interest rates. Normally, such a shift would support gold — which performs better in a low-rate environment — but this time, risk sentiment had already shifted.
Tim Waterer, chief market analyst at KCM Trade, said, “Gold remains a favored asset, but short-term volatility and macro shifts are driving investors to reassess exposure.”
Other precious metals were also affected. Silver dropped 1.2% to $32.28, platinum declined 0.4% to $985.30, and palladium fell 1% to $958.56, indicating broader weakness in the metals sector.
Bond markets added pressure as U.S. Treasury yields continued to fall. The 10-year yield dropped to 4.41%, and the 2-year fell to 3.94%. Traders are now pricing in a 59 basis point Fed rate cut by December — up from 49 points earlier in the week. The likelihood of a 25-point cut in July now stands at 40%.
Francesco Pesole, a strategist at ING, said that although the dollar's correlation with short-term interest rates has loosened, a dovish revaluation could spark a fresh wave of short positions on the dollar.
In currency markets, the euro gained 0.2% to $1.1209, though it ended the week 0.34% lower. The yen also strengthened, as the dollar fell 0.45%, ending a three-week rally. This came after weak GDP data from Japan and comments from Bank of Japan officials signaling continued loose monetary policy.
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