Before the U.S. market opened on Friday, spot gold continued to fall, falling nearly 2% on the day and falling below the $2,400 mark, a drop of nearly $50. Some analysts believe that the reason for this wave of decline in gold is that some investors began to take profits.

Zain Vawda, market analyst at OANDA, said, "It seems to be a combination of factors, including a stronger dollar, rising U.S. Treasury yields, easing geopolitical tensions, and potential profit-taking, all of which have led to gold weakness heading into the weekend. If gold closes below $2,400 today, it may be a challenge to reach $2,500 in the short term."

Markets are pricing in a 98% chance of a rate cut by the Federal Reserve in September, according to the CME’s FedWatch tool. Non-yielding gold tends to be more attractive in a low-rate environment.

Earlier this week, Federal Reserve Chairman Jerome Powell said recent inflation data has "provided some confidence" that inflation is moving back to the Fed's 2% target in a sustainable manner.

Ricardo Evangelista, senior analyst at ActivTrades, predicts that the support of $2,400 for gold will come into play and the price of gold should return above this level in the short term.

Another factor that could affect gold prices is traders' belief that Trump will win the November election and the more protectionist global affairs and trade stance that will come with it, Evangelista said. "That's very positive for the dollar and of course that will affect gold prices," he said.

Earlier, Capital Economics released a report that the recent highs in gold represent the apex of this year and predicts that gold will fall back towards $2,200. This forecast is based on the fact that high prices will suppress retail demand in key markets around the world, with Chinese demand being the focus. Excessively high gold prices may prevent consumers from maintaining the aggressive pace of purchases in the first half of the year.

Article forwarded from: Jinshi Data