Gold prices declined on Thursday as the US dollar strengthened, prompting investors to assess economic data showing slow progress in controlling inflation.
This raises concerns that the Federal Reserve may be cautious with future interest rate cuts. Spot gold dropped by 0.3% to $2,627.60 per ounce, while US gold futures fell 0.5% to $2,627.00. The dollar index rose 0.1%, making gold less appealing for holders of other currencies.
Market attention is focused on the Fed’s next steps, with recent Core Personal Consumption Expenditures (PCE) data pointing to slower inflation. This suggests that the Fed’s policies in 2025 may be less dovish than expected, according to Kelvin Wong, senior market analyst at OANDA. The Fed’s challenge to bring inflation down to its 2% target, along with potential tariffs under the incoming Trump administration, could limit the central bank’s ability to cut rates further.
According to the CME Group’s FedWatch tool, markets currently place a 64.7% probability on a quarter-point rate cut in December. Meanwhile, Mexican President Claudia Sheinbaum warned of potential retaliation if Trump imposes a 25% tariff, citing possible US job losses and higher consumer prices. Gold remains a safe-haven asset during periods of economic or geopolitical instability, including trade wars.
Trading volume is expected to be light on Thursday due to the US Thanksgiving holiday. In the short term, gold prices may face more pressure, particularly over the next few days to two weeks. However, the longer-term outlook for gold remains bullish, Wong added. SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, reported a 0.10% drop in its holdings to 878.55 metric tonnes on Wednesday.
Spot silver declined nearly 1% to $29.78 per ounce, platinum fell 0.1% to $928.05, and palladium remained unchanged at $972.75.
