Gold prices dropped 3% on Friday on a broader market sell-off, sparked by hawkish remarks from U.S. Federal Reserve officials, dimming hopes for a December interest rate cut.
Spot gold fell 1.9% to $4,092.72 per ounce, as of 02:33 p.m. ET (1933 GMT), after falling over 3% earlier in the session. However, bullion is up 2.3% so far this week.
U.S. gold futures for December delivery settled 2.4% lower at $4,094.20.
“It’s this idea that we’re going to see a lesser likelihood of a Fed rate cut in December that is taking some of the wind out of the sails of the gold and silver market,” said David Meger, director of metals trading at High Ridge Futures.
Equity markets tumbled, following the global selloff triggered by hawkish Fed signals.
The longest U.S. government shutdown, which ended Thursday, created a major data gap, leaving the Fed and traders flying blind ahead of next month’s policy meeting. Investors hoped fresh data would show a slowing economy, giving the Fed room to cut rates in December, boosting the appeal of non-yielding gold. Those expectations dimmed as more Fed policymakers adopted a cautious stance toward additional monetary easing.
Market expectations for a 25 basis-point rate cut next month fell to nearly 46%, from 50% earlier this week, CME Group’s FedWatch tool showed.
Non-yielding gold tends to perform well during periods of economic uncertainty and in a low-interest-rate environment.
“When margin calls and liquidations happen, traders close everything to free up margin… This is what partially explains why even gold is down in this risk off environment,” said Fawad Razaqzada, market analyst at City Index and FOREX.com, in a note.
Meanwhile, physical gold demand across major Asian markets was subdued this week.
In other metals, spot silver edged down 2.8% to $50.84 per ounce but was on track for a weekly gain, up 5.2% so far.
Platinum fell 2.1% to $1,547.30 and palladium lost 2.8% to $1,387.25. Both metals are so far up for the week.