Gold prices experienced a sharp decline today, Friday, after reaching their highest levels in over a year during the previous session, due to the rise of the dollar and comments from a Federal Reserve official indicating the need to raise interest rates again. Spot gold dropped 2.1% to $1,996.09 per ounce by 12:03 PM EST. U.S. gold futures fell 2.2% to $2,009.80.
The dollar index recovered from a one-year low, and Treasury yields increased after a senior U.S. Federal Reserve official warned about the need for the bank to continue raising interest rates to control inflation. Gold competes with the dollar as a safe haven amid economic or political turmoil, while the rise of the U.S. currency reduces demand for the precious metal from buyers holding other currencies.
Daniel Pavilonis, senior market strategist at RJO Futures, stated that the metals market is likely to decline ahead of the Fed's interest rate decision in May, with expectations of a 25 basis point increase. He added, "Prices will stabilize around the $2,000 level approximately." However, analysts say the outlook for the precious metal remains positive following its significant rise over the past two sessions amid growing recession fears, which could lead the Federal Reserve to end its interest rate hike cycle.
