Gold Prices Fall Over 2% as Dollar Strengthens and Investors Take Profits

Post by : Saif Nasser

Gold prices continued to drop on Wednesday after falling sharply on Tuesday, marking the steepest daily fall since 2020. Investors sold some of their gold holdings to book profits, while a stronger U.S. dollar added pressure on prices.

Spot gold fell 2.6% to $4,017.29 per ounce as of 11:03 GMT, reaching a near two-week low. Earlier in the day, it had briefly risen to $4,161.17 per ounce. U.S. gold futures for December delivery dropped 1.9% to $4,032.80 per ounce.

The U.S. dollar index rose 0.2% to a one-week high, making gold, which is priced in dollars, more expensive for buyers using other currencies. Strong dollar movements often lead investors to reduce gold holdings, which is seen as a safe asset.

Gold had risen sharply earlier this year, gaining 54% due to global economic uncertainty, geopolitical tensions, expectations of U.S. interest rate cuts, and strong inflows into gold exchange-traded funds (ETFs). Prices had reached a record high of $4,381.21 per ounce recently, but the strong gains meant gold became “overbought,” prompting traders to sell and lock in profits, according to analyst Ricardo Evangelista of ActivTrades.

On the technical side, gold found support around the 21-day moving average at $4,005 per ounce. Analysts say this level may prevent further sharp drops in the short term.

Investors are now looking ahead to the U.S. Consumer Price Index (CPI) report, due on Friday. The report could give clues about the Federal Reserve’s plans for interest rate cuts. Gold, which does not earn interest, typically benefits when interest rates are low or falling. A Reuters poll of economists expects the Fed to cut its key interest rate by 25 basis points next week and again in December.

Global political events are also affecting gold prices. A planned summit between U.S. President Donald Trump and Russian President Vladimir Putin was put on hold, while talks about a possible meeting between Trump and Chinese President Xi Jinping remain uncertain. Such geopolitical risks often support gold demand as a safe-haven investment.

Analyst Rhona O’Connell from StoneX said, “We are still in an era full of uncertainties, and this will likely mean that any substantial dips in gold prices will attract new buyers.”

In summary, gold prices are facing short-term pressure from profit-taking and a strong dollar. However, ongoing economic and political uncertainties continue to support long-term demand for the precious metal.