Gold Prices Retreat as Dollar Strengthens Ahead of Crucial U.S. Inflation Report
Gold prices slid on Friday as the U.S. dollar gained ground and market participants remained cautious ahead of a key U.S. inflation report that could shape the future trajectory of Federal Reserve interest rate policy.
As of 08:41 GMT, spot gold was down 0.6%, trading at $3,295.99 per ounce, while U.S. gold futures also dropped 0.6% to $3,294.20. For the week, bullion is set to close down by 1.8%, snapping a recent uptrend that had lifted it to record highs earlier this year.
Dollar Gains Pressure Gold Prices
The U.S. dollar index rose by 0.2% on Friday and is on track for a weekly gain. A stronger dollar typically weighs on gold by making the metal more expensive for foreign investors.
According to Carsten Menke, analyst at Julius Baer, “The U.S. dollar is up slightly this morning, which could be a source of pressure for gold.” He added that unless the upcoming inflation data surprises significantly, gold is unlikely to experience a major reaction, though heightened volatility remains a short-term risk.
Market Awaits U.S. Core PCE Inflation Data
All eyes are now on the Personal Consumption Expenditures (PCE) Price Index, the Federal Reserve’s preferred measure of inflation, which is scheduled for release at 12:30 GMT. Economists expect core PCE to have risen 2.2% year-on-year in April, slightly down from 2.3% in March, according to a Reuters poll.
“With U.S. core PCE looming large, there is some hesitance to take new long positions in gold,” noted Tim Waterer, chief market analyst at KCM Trade. This cautious stance reflects broader uncertainty around the Fed’s next steps on interest rates.
Currently, markets are pricing in two rate cuts totaling 50 basis points by the end of 2025, with the first expected in October. If inflation continues to cool in line with expectations, the Fed may gain the flexibility to begin easing its monetary stance—an environment generally favorable to non-yielding assets like gold.
Volatility in Precious Metals Likely to Persist
Beyond gold, silver fell 0.6% to $33.16 an ounce, platinum declined 0.8% to $1,073.80, and palladium slipped 0.4% to $969.79.
While recent dips in gold prices have prompted some dip-buying activity, overall investor sentiment remains cautious due to broader macroeconomic uncertainties. Analysts suggest that any upside in gold will likely remain capped until clearer signals emerge regarding U.S. inflation and the Fed’s monetary policy intentions.
Adding another layer of complexity, a federal appeals court on Thursday temporarily reinstated sweeping tariffs originally imposed by former President Donald Trump, just one day after a U.S. trade court ruled he had overstepped his authority. While the immediate impact on gold is limited, trade policy uncertainty could contribute to broader market volatility in the coming weeks.
