(Kitco Commentary) - Gold markets experienced a week of historic volatility, setting a new all-time record before suffering substantial declines. The precious metal's eight-week winning streak came to an abrupt end amid dollar strength and shifting sentiment around potential tariffs.
April gold futures reached an unprecedented high of $2,968.90 on Monday, only to retreat significantly during the remainder of the week. The contract posted notable losses of $40.30 on Tuesday and $43.90 on Thursday. Friday's trading saw gold open at $2,889, touching an intraday low of $2,844.10 before partially recovering to $2,863.30 by late afternoon, representing a daily decline of $24.50.
This dramatic reversal resulted in a weekly loss of $86.80, breaking the impressive streak of consecutive weekly gains that began in late December. Despite this setback, gold still managed to post a monthly gain of $30.30 (1.07%) for February.
The dollar's performance played a significant role in pressuring gold prices, with the dollar index climbing 0.94% for the week to reach 107.55.
Market sentiment has been heavily influenced by President Trump's threats to impose tariffs on imports from Canada and Mexico starting next week. Investors had been concerned about potential inflationary impacts from expanded tariffs, driving gold's initial surge.
However, sentiment shifted slightly after Friday's release of the PCE inflation index for January. The Commerce Department reported that the Federal Reserve's preferred inflation measure rose at a 2.5% annualized rate, down from December's 2.6% and matching analyst expectations. Similarly, core PCE, which excludes volatile food and energy prices, registered 2.6%, down from December's 2.9% and in line with forecasts.
These inflation figures are unlikely to alter the Federal Reserve's anticipated stance on interest rates, with most analysts expecting rates to remain unchanged throughout much of the year. This comes as the Trump Administration continues to threaten 25% tariffs on Canadian and Mexican imports while proposing to double the existing levy on Chinese goods to 20%.
Market participants now await next week's developments to see whether Trump will follow through on his tariff threats against Canada and Mexico, and what implications this might have for inflation in the coming months.
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