Quick overview

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Gold prices fell in London’s trading on Friday, largely due to a stronger dollar as investors scaled back their expectations of  US interest rate cuts ahead of Federal Reserve Chair Jerome Powell’s highly anticipated speech.

 

The dollar gained strength in anticipation of Powell, which led to a drop in the prices of other metals. The dollar was also expected to see substantial weekly gains.

Spot gold also dropped 0.3 percent to $3,328.37 per ounce, and gold futures also dipped by the same margins to $3,371.15 per ounce. However, some safe-haven demand remained, despite increasing signs that a peace treaty between Russia and Ukraine might not be reached soon, which limited gold’s losses.

This week, gold prices traded between 0.2 and 0.5 percent lower, marking a second consecutive week of decline. Traders mainly attributed this to expectations that the Fed will cut interest rates in September.

Additionally, the minutes from the central bank’s late-July meeting, released on Wednesday, reflected political tensions. According to CME FedWatch, markets currently price in a 73 percent chance that the Fed will cut rates by 25 basis points in September, down from 92 percent last week.

Elevated rates for longer tend to raise the opportunity cost of investing in gold and other non-yielding assets over Treasuries, creating sustained pressure on these assets.