Gold is set to post its biggest weekly fall of the year as traders take profits from a record rally, with growing worries over the tariff policies of U.S. President Donald Trump making the dollar stronger and diminishing demand for the metal.
Spot gold was trading at around $2,840 an ounce as of Friday, its second straight session of losses. The drop comes after Trump on Thursday announced tariffs on Canada and Mexico will be imposed from March 4, in addition to other levies on Chinese imports. The appreciation of the U.S. dollar that followed has further reduced gold’s attractiveness to foreign investors, as it is inversely related to the greenback.
Market players are responding to increased volatility, triggering a wider selloff among leveraged funds. The gold price correction was “overdue” after eight straight weeks of gains, says Ole Hansen, Saxo Bank A/S Head of Commodities Strategy. The recent policy updates have caused portfolio realignments as investors gauge the possible macroeconomic effects.
Traders are also processing new economic data showing that the Federal Reserve’s preferred measure of core inflation has registered a modest softening in price pressures. Still, Fed officials are being cautious, indicating that a significant and sustained drop in inflation is needed before they can think about rate cuts. Since gold is a non-yielding asset, lower interest rates would make it more appealing.
This week’s gold retreat comes on the heels of a safe-haven surge that sent prices to an all-time high of $2,956.19 per ounce on Monday. Ongoing fears about the inflationary effect of Trump’s tariffs, combined with trade uncertainty and concerns over economic stability, have continued to bolster gold as a risk hedge.
As of 10:43 a.m. in New York, spot gold had lost 1.3% to $2,840.67 per ounce, mirroring a weekly loss of 3.2%. On the other hand, the Bloomberg Dollar Spot Index rose 0.1%, following its 0.6% jump in the previous session. Other precious metals such as silver, platinum, and palladium also posted losses.