Gold prices fell on Friday, weighed down by a stronger US dollar and positive signs in trade talks between the United States and the European Union (EU) that dampened demand for safe-haven assets.
Spot gold prices fell 0.7% to $3,343.69 an ounce, while US gold futures fell 0.8% to $3,345.20. The US dollar index rose from its lowest level in more than two weeks, making gold more expensive for overseas buyers. At the same time, the yield on the 10-year US Treasury bond also rose.
“The agreement with Japan is significant, and there is now hope that a US-EU deal can be concluded before the August 1 deadline. This reduces demand for safe-haven assets as risk appetite increases and capital flows into risky assets,” said Peter Grant, Vice President and Senior Metals Strategist at Zaner Metals.
After the US-Japan trade deal was signed this week, the European Commission said a deal with the US was close, although the EU has approved retaliatory tariffs if talks fail. In economic data, US jobless claims fell to a three-month low, a sign that the labour market remains firm despite a slowdown in hiring.
The steady jobs data is expected to give the Federal Reserve room to keep interest rates at 4.25%-4.50% at its meeting next week, even as inflation shows signs of rising following President Donald Trump's import tariffs. Trump's surprise visit to the central bank recently was seen as another attempt to pressure Chairman Jerome Powell to implement a major rate cut.
According to Grant, gold may attract buying interest around $3,300, but is not expected to make new highs until after the Fed meeting results are announced. Gold typically performs well in uncertain and low-interest rate environments.
