Gold retreats from record highs amid stronger dollar

Gold prices fell over 1% to $3,015 an ounce on Friday, pressured by a stronger U.S. dollar and profit-taking, though the metal remained on track for a third straight weekly gain.

Gold retreats from record highs amid stronger dollar

Despite the pullback, bullion has risen 0.7% this week, supported by persistent geopolitical tensions and expectations of future U.S. Federal Reserve rate cuts. Gold, a traditional safe-haven asset, has recorded 16 record highs so far this year, reaching an all-time peak of $3,057.21 per ounce on Thursday. The decline was primarily driven by the dollar’s strength, as the greenback surged to a two-week high following remarks from Fed Chair Jerome Powell, who reaffirmed that policymakers would take a cautious approach to monetary easing. A stronger dollar makes gold more expensive for international buyers, putting downward pressure on prices. However, traders still anticipate at least two Fed rate cuts this year, which could support gold’s longer-term bullish outlook by reducing the opportunity cost of holding non-yielding assets like bullion.

Geopolitical uncertainties underpin gold demand

Beyond monetary policy, geopolitical uncertainties continue to underpin demand for gold. Renewed conflict in Gaza, rising tensions in the South China Sea, and concerns over economic fallout from U.S. tariffs on key global trade partners have fueled investor appetite for safe-haven assets. Meanwhile, central bank purchases of gold remain robust, with China and other emerging economies increasing their reserves as a hedge against currency volatility and inflation risks. Looking ahead, investors are closely monitoring upcoming economic data, particularly U.S. inflation and labor market figures, for further clues on the Fed’s policy path. Any signs of economic weakness could bolster expectations of rate cuts and provide additional support for gold prices in the coming months.