Gold prices fell on Friday as investors resorted to booking profits after the yellow metal had surged to a one-month-high in the previous session.
“Gold price (XAU/USD) retains its negative bias through the first half of the European session on Friday, though it lacks follow-through selling and remains close to a one-month peak touched the previous day,” Haresh Menghani, editor at FXstreet, said in a report.
The dollar’s rise on Friday also dented demand for the yellow metal. A stronger dollar makes commodities priced in the greenback more expensive for overseas buyers, thereby limiting demand.
Menghani further said:
Meanwhile, expectations that softer inflation in the US will allow the Federal Reserve (Fed) to cut interest rates further this year should keep a lid on any further USD appreciation and lend support to the non-yielding gold price.
Even though prices were in the red on Friday, gold is set for a third-weekly gain this week.
At the time of writing, the February gold contract on COMEX was at $2,733.01 per ounce, down 0.7% from the previous close.
Furthermore, uncertainties surrounding US President-elect Donald Trump’s tariff plans and trade policies have kept markets on the edge and increased safe-haven demand for the yellow metal.
Among other precious metals, silver prices on COMEX were at $31.282 per ounce, down 1.4% from the previous close.
Silver prices had risen sharply as well over the last few weeks.
Fed rate cuts uncertainty
Traders continued to speculate over the US Federal Reserve’s interest rate cut path this year.
While inflation in the US came in softer for December, it still remained relatively high.
Menghani said:
US data released this week pointed to signs of abating inflation and fueled speculations that the Federal Reserve will cut rates twice this year, which, in turn, benefitted the non-yielding Gold price.
Adding to this, Fed Governor Christopher Waller said on Thursday that inflation is likely to continue to ease and three or four rate cuts are still possible this year if US economic data weakens further.
This fuelled a rally in gold prices on Thursday, taking prices to a one-month high of $2,757 per ounce.
Source: FXstreet
Trump trade jitters
Additionally, the anticipation of next week’s inauguration day for President-elect Trump has kept the market on its toes.
Gold traders continued to be cautious about Trump’s tariff plans and protectionist policies.
Increased tariffs and expansionary plans could feed into higher inflation in the US, which bodes well for gold.
Investors purchase more gold to hedge against higher inflation.
However, on the flip side, higher inflation in the US may also prompt the Fed to slow down monetary easing. Elevated interest rates could weigh on demand for the yellow metal as it is a non-yielding asset.
Copper prices rise
Meanwhile, copper prices on the London Metal Exchange rose on upbeat economic data from China.
China’s economy exhibited stronger-than-anticipated growth in the fourth quarter of 2024, with a GDP growth rate of 5.4%.
This positive performance pushed China’s annual GDP growth for the year to 5%, aligning with the target set by Beijing.
The robust economic activity was primarily fueled by a series of proactive and substantial stimulus measures implemented by the Chinese government.
These measures were introduced as a strategic response to counteract the adverse effects of ongoing trade tensions with the US.
Beijing’s commitment to economic stability and growth is evident in its willingness to deploy further support mechanisms.
Copper prices have experienced a surge over the past two weeks, driven by optimistic projections of increased demand from China.
This optimism stems from anticipated stimulus measures by the Chinese government, which are expected to boost economic activity and consequently, the consumption of copper.
Further bolstering this outlook, China’s copper imports reached a 13-month high in December, signaling a potential resurgence in demand for the metal.
At the time of writing, the three-month copper contract on LME was at $9,262 per ton, up 0.2%.
The post Gold prices slip on profit booking but set for third-weekly gain appeared first on Invezz
