Gold Falls Amid Bets on Tightening Monetary Policy

SadaNews - Gold prices fell by more than 4 percent on Friday amid rising speculation that the next Federal Reserve Chair may adopt a more aggressive monetary approach. However, the precious metal is still on track to achieve its strongest monthly gains since 1980, driven by investors' demand for safe havens amidst ongoing geopolitical and economic uncertainties.

The price of gold in spot transactions dropped by 3 percent to reach $5232.57 per ounce by 05:20 GMT, after having fallen by more than 5 percent earlier in the session. This decline follows its record high of $5594.82 per ounce on Thursday, according to Reuters.

Despite this drop, gold prices have risen by more than 20 percent since the beginning of January, heading towards a sixth consecutive monthly gain, the largest since 1980. Additionally, U.S. gold futures for February delivery decreased by 1.8 percent to $5225 per ounce.

Tim Waterer, senior trading analyst at KCM, stated that "the likelihood of selecting a Federal Reserve Chair less inclined towards monetary easing, alongside the strengthening dollar and gold reaching a state of buyer saturation, were all factors that pressured precious metal prices."

U.S. President Donald Trump stated on Thursday his intention to announce his nominee to succeed Federal Reserve Chair Jerome Powell on Friday, amid rising speculation that Kevin Warsh, a former member of the Board of Governors of the Federal Reserve, would be chosen.

Matt Simpson, senior analyst at StoneX, noted that "rumors suggesting Kevin Warsh may take over the Federal Reserve Chair position negatively impacted gold during Asian trading."

In contrast, the U.S. dollar recovered from its lowest levels in several years, partially supported by the Federal Reserve's decision on Wednesday to keep interest rates unchanged, although it is still on track to register its second consecutive weekly loss.

The rise in the dollar increases the cost of gold priced in U.S. dollars for buyers outside the United States. Markets are still anticipating two interest rate cuts within 2026.

Swiss customs data released on Thursday showed that gold exports from Switzerland to the United Kingdom, which is the largest global center for gold trading outside exchanges, surged to their highest level since August 2019.

The "Hang Seng" gold trading index also rose by more than 9 percent on its first trading day in Hong Kong during the previous session.

Other precious metals also saw declines; the price of silver in spot transactions fell by 7 percent to $107.70 per ounce, after reaching a record high of $121.64 on Thursday. However, silver has risen by 56 percent since the beginning of the month, heading towards its best monthly performance ever.

The spot price of platinum dropped by 3.7 percent to $2531.84 per ounce, after marking its historical high of $2918.80 on Monday, while the price of palladium fell by 4 percent to $1925.50 per ounce.