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Gold prices experienced a sharp decline in Asian trading on Friday, retreating from recent record highs due to a combination of profit-taking and a strengthening dollar fueled by speculation over a potential second term for Donald Trump and stricter U.S. trade policies.
The spot gold price plummeted 0.9% to $2,423.89 an ounce, while gold futures for August delivery also dropped 1.2% to $2,426.45 an ounce. This sharp reversal comes after a week-long rally that saw spot prices reach an all-time high of $2,483.78 an ounce.
The initial surge in gold prices was driven by growing optimism over potential interest rate cuts by the Federal Reserve in September. Traders had been pricing in a more than 90% chance of a 25 basis point cut. However, unexpectedly strong jobless claims data in the U.S. this week indicated a resilient labor market, a key factor influencing the Fed’s decision-making, and led to a strengthening dollar.
Speculation over a potential second term for Donald Trump, following a surge in his popularity after a failed assassination attempt, further bolstered the dollar. Trump’s protectionist policies are seen as potentially driving capital back into the U.S.
Other precious metals also suffered losses, mirroring gold’s decline. Platinum futures fell 0.5%, while silver futures slid 1.6% to a two-week low.
Meanwhile, copper prices steadied on Friday but remained significantly lower for the week due to growing uncertainty over China, the world’s largest copper importer. Benchmark copper futures on the London Metal Exchange rose 0.3% to $9,411.0 a tonne, while one-month copper futures also gained 0.3% to $4.280 a pound. Despite this slight recovery, both contracts were down between 4.7% and 7% for the week.
The losses in copper were initially triggered by weaker-than-expected Chinese economic growth data for the second quarter. Additionally, concerns over potential stricter U.S. trade restrictions against China and speculation about a Trump presidency further weighed on sentiment towards the red metal.
The Chinese Communist Party’s Third Plenum, which commenced earlier in the week, failed to provide concrete details on additional stimulus measures, despite officials vowing to offer more support to the economy. This lack of clarity has contributed to the ongoing uncertainty surrounding China’s economic outlook and its impact on copper demand.
