Gold prices experienced a decline in Asian trading on Friday, further retreating from record highs reached earlier in the week, as a significant rise in the dollar, spurred by a surprise interest rate cut from the Swiss National Bank (SNB), weighed on metal markets.
Spot gold dipped by 0.4% to $2,173.62 per ounce, while April gold futures dropped nearly 0.5% to $2,174.90 per ounce by 00:28 ET (04:28 GMT).
The primary pressure on gold stemmed from the notable gains in the dollar, with the dollar index reaching a three-week high above the 104 level. The unexpected rate cut by the SNB, combined with dovish signals from the Bank of England, positioned the dollar as the sole major high-yielding, low-risk currency.
Furthermore, signs of resilience in the U.S. economy, including an optimistic outlook from the Federal Reserve and robust purchasing managers index data, reinforced investor preference for the dollar. This trend negatively impacted metal markets, given that investments in precious metals like gold do not offer direct yields.
The strength of the dollar is anticipated to restrain significant upside potential in gold, at least until the Federal Reserve begins to reduce interest rates later this year. The central bank is currently expected to implement a 25 basis point rate cut in June, according to the CME Fedwatch tool.
Analysts predict that the eventual decrease in interest rates will likely benefit bullion prices later in the year, with Citigroup analysts setting a year-end price target of $2,300 per ounce for gold.
In addition to gold, other precious metals also saw declines in Asian trading, erasing much of the gains made following the Fed’s announcements. Platinum futures fell by 0.7% to $905.10 per ounce, while silver futures slid by 1% to $24.758 per ounce.
Copper, another significant metal, experienced a pullback from 11-month highs amid growing concerns about China’s economic outlook. Three-month copper futures on the London Metal Exchange dropped by 1% to $8,882.0 per ton, while one-month U.S. copper futures sank by 1.2% to $4.0175 per pound. The decline in copper was exacerbated by worsening sentiment towards China, driven by fears of slowing economic growth and potential U.S. sanctions.
Despite these challenges, the outlook for copper markets remained tight, especially with reports indicating plans by major Chinese copper refiners to reduce output this year.