Gold prices retreated from record highs during Friday's Asian deals, as traders locked in profits and the United States dollar rebounded, with markets bracing for President Donald Trump’s announcement of his Federal Reserve chair nomination later in the day.
By 4:10 pm AEDT (5:10 am GMT), spot gold was down 3% at US$5,207.79 per ounce, following heightened volatility in the previous session. The metal had earlier failed to sustain gains above the US$5,400 level, triggering a wave of corrective selling as short-term traders moved to secure profits after the steep advance.
Despite the decline, bullion remained on course for its strongest monthly performance in decades.
The pullback in gold was accompanied by a broad-based recovery in the U.S. dollar, which staged a notable comeback after recent weakness.
According to the Wall Street Journal, President Donald Trump and Senate Democrats reached a deal aimed at averting a U.S. government shutdown. The agreement eased immediate fiscal uncertainty and lent support to the dollar, reducing some of the safe-haven demand that had previously buoyed gold.
Monetary policy expectations also played a role. The Federal Reserve’s recent decision to hold rates steady, coupled with a cautious tone on the outlook, initially pressured the dollar.
Attention is now firmly on the White House, with the Trump administration reportedly preparing to nominate former Fed Governor Kevin Warsh as the next Chair of the Federal Reserve, according to The Economic Times.
The leadership decision is seen as significant for the future direction of U.S. monetary policy, particularly at a time when inflation dynamics and growth risks remain in focus.
A Fed chair perceived as more hawkish could reinforce expectations that interest rates will stay higher for longer, a scenario that tends to support the dollar while limiting the upside for non-yielding assets such as gold.
Conversely, any signals of a more accommodative stance could reignite bullion’s rally, given the metal’s sensitivity to real yields and currency movements.
Despite the current correction, underlying support for gold has not disappeared. Geopolitical risks remain elevated, particularly amid tensions between the United States and Iran. Ongoing uncertainty in global trade policy is also contributing to a cautious investor backdrop.
From a macroeconomic perspective, traders are also awaiting the release of U.S. producer price index (PPI) data later in the U.S. session.
