Gold loses its shine: Dollar strength dampens precious metal markets

Gold prices declined on Thursday as the US dollar gained strength. Investors assessed recent economic data indicating a standstill in inflation development, suggesting that the Federal Reserve might approach further interest rate cuts cautiously. The spot gold price fell by 0.3% to $2,627.60 per ounce. US gold futures also dropped by 0.5% to $2,627.00. The dollar index rose by 0.1%, reducing the attractiveness of gold for holders of other currencies. Market analyst Kelvin Wong from OANDA points out that current data on Core Personal Consumption Expenditures (PCE) indicate slowed inflation and make expectations for the Fed’s interest rate policy next year seem less accommodative than previously assumed. Additionally, the Fed might be limited in its ability to implement interest rate cuts next year due to ongoing efforts to return inflation to its 2% target and the potential for higher tariffs under the impending Trump administration. The market now sees a 64.7% chance of a quarter-point rate cut in December, according to the CME Group's FedWatch tool. Separately, Mexican President Claudia Sheinbaum warned of retaliatory measures if Trump were to enforce a 25% tariff, which could result in potential job losses in the US and higher consumer prices. Gold is considered a safe-haven asset during times of economic or geopolitical uncertainties, including trade wars. Given the US market closure due to the Thanksgiving holiday, a low trading volume is expected in the near future. In the short term, particularly in the coming days to two weeks, gold could remain under pressure. However, the longer-term upward trend for gold remains intact, Wong added. The SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, reported that its holdings decreased by 0.10% to 878.55 tons. Spot silver fell by nearly 1% to $29.78 per ounce, platinum by 0.1% to $928.05, while palladium remained stable at $972.75.