Mar 22 2024: Gold prices retreated in Asian trading on Friday, moving further away from their all-time highs reached earlier in the week as the dollar gained momentum following a surprise interest rate cut by the Swiss National Bank (SNB), putting pressure on metal markets.
After surging to record highs above $2,200 per ounce due to the Federal Reserve signaling potential interest rate cuts in 2024, gold saw a reversal as the dollar rebounded strongly amid dovish signals from other major central banks.
Spot gold fell 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).
Impact of Dollar Strength and Central Bank Policies on Gold
The primary pressure on gold came from the sharp rise in the dollar, with the dollar index hitting a three-week high above 104.
The dollar’s surge, fueled by the SNB’s unexpected rate cut and dovish sentiments from the Bank of England, positioned the dollar as the dominant high-yielding, low-risk currency in the market.
Positive signs in the U.S. economy, including an optimistic outlook from the Federal Reserve and strong purchasing managers index data, further bolstered the dollar’s strength and dampened demand for precious metals like gold, which do not provide direct yields.
The prevailing strength of the dollar is expected to limit significant upward movements in gold until the Fed begins cutting interest rates later in the year. The Fed is anticipated to implement a 25 basis point rate cut in June, according to the CME Fedwatch tool.
However, a potential reduction in interest rates later in the year could provide a boost to gold prices, with Citi analysts setting a year-end price target of $2,300 per ounce for the yellow metal.
Other Precious Metals and Copper Prices Decline Amid Market Concerns
In Asian trading, other precious metals also saw declines, relinquishing gains made after the Fed’s announcement. Platinum futures fell 0.7% to $905.10 per ounce, while silver futures slid 1% to $24.758 per ounce.
Copper prices also faced downward pressure, with three-month copper futures on the London Metal Exchange dropping 1% to $8,882.0 per ton, and one-month U.S. copper futures sinking 1.2% to $4.0175 per pound. These contracts sharply declined from their 11-month highs earlier this week.
The decline in copper prices was partly attributed to growing concerns about China, as the country’s stock markets experienced steep declines amid worries about slowing economic growth and potential U.S. sanctions.
However, the outlook for copper markets remained tight, especially with reports indicating that major Chinese copper refiners planned to reduce output this year.