Gold Prices Decline Amid Dollar Strength and Trade Optimism

Gold prices experienced a downturn on Thursday, reaching a two-week low as a robust dollar and easing trade tensions diminished the metal’s appeal as a safe haven. Investors are now focusing on the upcoming U.S. non-farm payrolls report.

Spot gold decreased by 1.8% to $3,228.70 per ounce as of 0411 GMT, marking its lowest point since mid-April. Similarly, U.S. gold futures fell by 2.5% to $3,236.10.

The dollar index strengthened by 0.4% against other currencies, which made gold less attractive for investors holding those currencies.

U.S. President Donald Trump mentioned potential trade agreements with India, South Korea, and Japan, aiming to transform his tariff strategy into formal trade deals.

Market Analysis

According to Ilya Spivak, head of global macro at Tastylive, the easing of trade war concerns led to the retracement in gold prices. However, market confidence remains fragile, with investors responding quickly to news headlines.

Gold, traditionally seen as a hedge against economic and political instability, often performs well in environments with low interest rates. It had previously reached record highs in April due to significant uncertainties.

Spivak noted that while the Federal Reserve’s dovish outlook could bolster gold, a further unwinding of the “April panic” might be necessary.

The U.S. economy saw a contraction for the first time in three years during the initial quarter of fiscal year 2025, driven by businesses accelerating imports in anticipation of expected tariffs.

Expectations are building that clearer signs of economic weakness by June will prompt the Federal Reserve to resume cutting interest rates, potentially by a full percentage point by the close of 2025, as traders predicted on Wednesday.

The market is now awaiting the non-farm payrolls report on Friday for further indications regarding the Federal Reserve’s policy direction.

China’s stock, bond, foreign exchange, and commodity futures markets are closed from May 1 to May 5 due to the Chinese Labour Day holiday.

In other precious metals, spot silver declined by 1.6% to $32.09 per ounce, platinum decreased by 0.8% to $958.86, and palladium fell by 0.2% to $935.88.