Gold Drops 0.2% Weekly Amid Strong US Data

Gold prices experienced a slight increase on Friday morning, but this was not enough to alter the overall trend. For the first time in three months, gold is on track to end the week with a loss, primarily due to strong U.S. economic data and reduced concerns about the Federal Reserve's independence.

As of the latest update, spot gold rose by 0.3% to $3,349.49 per ounce, recovering some of Thursday's 1.1% decline. However, over the course of the week, gold has seen a 0.2% decrease. Meanwhile, U.S. gold futures fell by 0.3% to $3,354.70.

This downturn in gold prices coincides with a surge in platinum, which jumped by 1% to $1,472.20 per ounce, reaching its highest level since August 2014, an almost 11-year high. Palladium also saw an increase, climbing by 1.4% to $1,297.78, its highest since August of the previous year. Silver remained stable at $38.12.

This week has been marked by significant events. Initially, there were reports that Donald Trump was considering firing Federal Reserve Chair Jerome Powell, which raised concerns about the Fed's independence. However, by midweek, Trump clarified that he had no plans to remove Powell, although he continued to criticize the Fed's rate policies.

These developments initially shook the markets, but fears quickly subsided. According to a commodity analyst, market participants remain concerned about the Fed's independence, but these risks have declined, and solid U.S. economic data has limited gold's upside potential.

The U.S. economy shows no signs of slowing down. Retail sales for June exceeded expectations, and initial jobless claims for the week ending July 12 decreased, indicating fewer layoffs. This data reduces the likelihood of rate cuts in the near future, putting pressure on gold prices.

However, the analyst noted that Trump's desire for aggressive rate cuts is providing some support to the market. While gold prices are softening, they are not collapsing. The uncertainty surrounding the Fed's actions is preventing gold from experiencing a significant drop.

U.S. Treasury yields decreased on Friday as investors awaited more economic indicators. The 10-year yield slipped by just over 1 basis point to 4.45%, while the 2-year yield dropped by 2 basis points to 3.89%. The 30-year yield also eased by more than a point to settle at 5%.

Investors are closely watching two key indicators on Friday: the Michigan Consumer Sentiment Index and data on building permits and housing starts. The preliminary July reading for the Consumer Sentiment Index is expected to rise to 61.8 from 60.7, indicating continued confidence in the economy. The housing data will provide insights into the outlook for the housing market, which has been affected by high mortgage rates.

These economic indicators are crucial as they directly influence expectations for future Fed actions. Stronger data suggests that the Fed has more room to maintain steady rates, which is detrimental to gold. Gold does not earn interest, so when bond yields become more attractive, gold loses its appeal.

Despite the near-term challenges, gold has long-term support. According to a precious metals expert, while gold may struggle in the short term without a new policy shock, its underlying uptrend remains strong, supported by central bank buying and increasing demand for allocated bullion.

However, the expert also noted that investor interest has shifted from gold to other precious metals like silver, platinum, and palladium, which are seen as pro-growth, industrial alternatives. This shift is evident as platinum reached an almost 11-year high, palladium hit its best level since last August, and silver remained near multi-year highs.

The U.S. dollar also played a role in gold's performance. Although it was down by 0.4% on Friday, it is on track for its second consecutive weekly rise. A stronger dollar makes gold more expensive for foreign buyers, reducing demand.