Gold prices took a sharp dip of more than 2% on Friday, following a surge earlier in the week to an all-time peak of $2,483.60 per ounce. Spot gold was down 1.8% at $2,401.49 per ounce, while U.S. gold futures fell about 2.2% to $2,403.70.
The drop in gold prices was largely attributed to the strengthening U.S. dollar and rising Treasury yields, leading to profit-taking by investors. Alex Ebkarian, the chief operating officer at Allegiance Gold, noted that the market sentiment was also influenced by expectations of a soft landing and potential interest rate cuts by the U.S. Federal Reserve in September.
Market participants are now eyeing the possibility of a rate cut next month, with a 98% chance implied by the CME FedWatch Tool. In a low-interest rate environment, non-yielding assets like gold tend to become more attractive to investors seeking a safe haven.
Despite the dip in gold prices, some experts like Chris Mancini, associate portfolio manager of the Gabelli Gold Fund, believe that gold could see a meaningful rise if interest rates decline further. Additionally, the potential for government stimulus measures, especially for infrastructure projects, could boost both gold and industrial metals simultaneously.
On the physical side, Asian gold demand remained sluggish as customers hesitated to make new purchases at current high price levels. Other precious metals also saw declines, with spot silver falling around 3%, platinum easing 0.2%, and palladium losing 1.2% for the week. Overall, the metals market is experiencing some turbulence as investors navigate changing economic conditions and market expectations.
