On Friday, gold experienced a significant pullback after reaching a more than one-year high in the previous session due to a rebound in the dollar and comments from a Federal Reserve official on the need for another interest rate hike.
By 14:40 GMT, spot gold had fallen 1.6% to $2,007.92 per ounce, and U.S. gold futures had dropped 1.6% to $2,021.90.
The dollar index bounced back from a one-year low, and Treasury yields rose following a warning from a key Fed official that the central bank must continue to hike rates to combat inflation.
Gold is often viewed as a safe haven in times of economic or political unrest, but gains in the U.S. currency can decrease demand for the commodity among foreign buyers.
In addition, the CME FedWatch tool revealed that traders were pricing in an 82.6% chance of a 25 basis-point hike in May, up from 70% earlier in the week, further hindering zero-yield gold.
According to Daniel Pavilonis, senior market strategist at RJO Futures, the metals market will likely weaken as we approach the “blackout period” ahead of the Fed decision in May, with a 25 basis-point hike expected. Profit-taking is expected to occur, but prices will likely stabilize around $2,000.
Despite this setback, analysts predict a positive outlook for bullion, following its exceptional run in the last couple of sessions amid increasing concerns of a recession that could eventually lead to the Fed ending its rate-hike cycle.
Phillip Streible, chief market strategist at Blue Line Futures in Chicago, stated that he expects gold prices to hit record highs and extend gains to $2,100.
Silver also experienced a 1.3% decline to $25.46 per ounce, after reaching a year-high of $26.07 earlier in the session, but is set to achieve its fifth consecutive weekly gain.
Platinum fell 0.5% to $1,041.61, while palladium was down 0.9% at $1,485.44, but both are on track for weekly gains.