Gold prices recorded a sharp decline today, Friday, after hitting their highest levels in more than a year in the previous session, with the rise of the dollar and after an official of the Federal Reserve (US Central Bank) indicated the need to raise interest rates again.
Spot gold fell 2.1 percent to $1,996.09 an ounce by 12:03 a.m. EDT. US gold futures fell 2.2 percent to $2,009.80.
The dollar index rebounded from its lowest level in a year and Treasury yields rose after a senior US central official warned of the need for the bank to continue raising interest rates to curb inflation.
Gold competes with the dollar as a safe haven amid economic or political turmoil, while the rise in the US currency leads to a decline in demand for the precious metal from buyers holding other currencies.
Daniel Pavilonis, chief market strategist at RJO Futures, said the metals market is likely to decline ahead of the US Federal Reserve’s interest rate decision in May, with expectations of a 25 basis point hike.
“Prices will stabilize near the level of approximately $2,000,” he added.
However, analysts say that the prospects for the precious metal remain positive, after its significant rise in the past two sessions, amid growing fears of a recession that may push the US central bank to end the rate-raising cycle.
“I still expect prices to hit record highs and continue to rise to $2,100,” said Philip Stripel, chief market strategist at Blue Line Futures in Chicago.
As for other precious metals, spot silver fell 2.1 percent to $25.25 an ounce, after hitting a one-year high of $26.07 earlier in the session and heading towards recording gains for the fifth consecutive week.
Platinum fell 0.7% to $1,040.07, while palladium rose 0.9% to $1,512.88, and the two metals are also on track for weekly gains.
