Gold prices declined on Thursday as traders locked in profits following a record-breaking rally. Spot gold, which earlier reached a new high of $2,790.15 per ounce, fell by as much as 2%, hitting $2,731.65 before settling at $2,738.51 an ounce by mid-morning in New York. The pullback comes amid anticipation of significant events next week, including the U.S. presidential election on Nov. 5 and a closely watched Federal Reserve meeting.
"You're going to see a bit more consolidation," said David Meger, director of metals trading at High Ridge Futures. "We have a lot of major impactful news next week. The U.S. election on Tuesday, [and the] Fed meeting on Wednesday. So it's really not surprising to see some traders take profits."
Gold's appeal as a safe haven has surged this year, with prices gaining over 30% amid persistent geopolitical tensions in the Middle East and Ukraine, central bank buying, and economic uncertainties. Thursday's U.S. inflation data showed a 2.1% rise, just above the Federal Reserve's 2% target, a factor that could influence the central bank's stance on interest rates. Lower borrowing costs are generally favorable for gold, which yields no interest, though the outlook for further cuts remains mixed.
Inflation-adjusted consumer spending data released Thursday showed an increase of 0.4%, supported by wage growth, which could factor into the Fed's interest rate decisions. The market currently sees a 95% probability of a quarter-point rate cut next week, a move expected to further benefit gold. U.S. personal consumption expenditures (PCE) also rose by 0.2% in September, aligning with forecasts.
Underlying demand for gold remains strong, fueled by global uncertainties and the upcoming U.S. election. According to Ole Hansen, head of commodity strategy at Saxo Bank A/S, "The Nov. 5 election may open gold up to a correction of more than $100 an ounce." Analysts suggest that the tight race between Vice President Kamala Harris and former President Donald Trump has introduced an added layer of market caution. Opinion polls show both candidates neck and neck, amplifying investors' interest in safe-haven assets like gold.
StoneX analyst Rhona O'Connell highlighted that "Gold and the (U.S.) dollar are acting together as safe havens, which is not unusual in times of strife." She added that the market remains in a "buy-on-dips" mode, meaning that even minor declines are viewed as buying opportunities in anticipation of continued market uncertainty.
U.S. gold futures also settled lower on Thursday, dropping by 1.8% to $2,749.30 an ounce. Alongside gold, other precious metals fell, with silver dropping 3.4% to $32.65 per ounce and platinum and palladium each posting losses.
For now, the precious metals market is experiencing what analysts see as a natural breather before a high-impact week. "The election and Fed meeting are back-to-back, so it makes sense that some traders are locking in gains now," Meger added, noting the opportunity for volatility in the days ahead.
Geopolitical tensions and steady central bank demand continue to support gold's longer-term outlook, making it a favored choice for investors seeking stability amid economic and political shifts. "Underlying forces spurring demand for gold include geopolitical tensions and uncertainties about the outcome of the election," noted O'Connell.
