Gold prices decline from all-time peak on profit taking, firmer dollar

Gold prices dipped more than 2% on Friday, as the dollar gained and profit taking kicked in following bullion's all-time peak hit earlier this week, which was fuelled by rising expectations of U.S. interest rate cuts in September.

Spot gold was down 1.9% at $2,399.13 per ounce by 1709 GMT. Bullion hit an all-time high of $2,483.60 on Wednesday.

U.S. gold futures fell about 2.2% to $2,401.30.

The U.S. dollar rose 0.2% against its rivals, while benchmark 10-year Treasury yields also rose, putting pressure on bullion. [USD/] [US/]

"Besides profit taking, the market is down on this narrative of a soft landing; it could put pressure on the price of gold, as investors will shift money from a safe to more riskier investment," said Alex Ebkarian, chief operating officer at Allegiance Gold.

 

"We are seeing a lot more investment-driven decisions demand rise in gold," he added.

Markets are now anticipating a 98% chance of a rate cut by the U.S. Federal Reserve in September, according to the CME FedWatch Tool. Non-yielding bullion's appeal tends to shine in a low-interest rate environment.

Federal Reserve Chair Jerome Powell said earlier this week that recent inflation readings "add somewhat to confidence" that the pace of price increases is returning to the central bank's target in a sustainable fashion.

"If ETFs add gold as interest rates decline, then gold should rise meaningfully," said Chris Mancini, associate portfolio manager of the Gabelli Gold Fund. [GOL/ETF]

"If the weaker economy causes governments to stimulate, especially for infrastructure, then both gold and industrial metals will rise at the same time."

On the physical side, Asian gold demand was sluggish this week, reflecting customers' reluctance to make new purchases despite deep discounts, who were instead seen capitalizing on record-high bullion prices.

Spot silver fell about 3.2% to $29.11 per ounce, and platinum eased 0.6% to $962.05, while palladium lost 2.8% to $904.25. All three metals were headed for weekly declines.