Key Points:
- Spot gold fell 2.4% to $4,540.14 an ounce, marking its worst week since the middle of March.
- Hotter United States inflation data pushed the dollar higher as traders expect more interest rate hikes.
- President Donald Trump ended his trip to China without securing major trade or peace agreements.
- Spot silver crashed 9% to $75.9795 an ounce while copper prices retreated from record highs.
Gold had a terrible week as investors reacted to global economic fears. Spot gold fell 2.4% to settle at $4,540.14 per ounce on Friday. United States gold futures dropped 3% to close at $4,543.60 per ounce. For the whole week, spot gold lost 3.7%, and gold futures dropped 4%. This steep decline marks the worst week for the precious metal since mid-March.
The main reason gold fell was the massive strength of the United States dollar. The dollar actually recorded its best week in over nine months. A strong dollar makes gold much more expensive for foreign buyers who use other currencies. Investors also dumped gold because they expect the central bank to raise interest rates soon to fight rising costs.
The current inflation problem stems directly from the Middle East. High oil prices caused by the ongoing war in Iran pushed up everyday costs for American shoppers and factories. New government reports showed that the consumer price index and the producer price index for April both came in much hotter than economists expected. These two specific numbers feed directly into the main inflation gauge that the Federal Reserve watches to make policy decisions.
Traders reacted quickly to this bad inflation news. They now believe the Federal Reserve will raise interest rates at the remaining monetary policy meetings this year. People betting on the Kalshi prediction market say there is a 60% chance the central bank will hike interest rates before July 2027. High interest rates usually hurt investments like gold because the metal does not pay any regular yields to its holders.
Meanwhile, global politics gave investors even more reasons to worry. President Donald Trump finished his high-stakes visit to China on Friday. His administration posted videos showing him boarding Air Force One to fly home. This trip was the first time a sitting United States president had visited the Asian country since Trump visited during his first term in 2017.
Trump held a second round of talks and a private meeting with Chinese President Xi Jinping on Friday. However, the two leaders failed to announce any breakthroughs on trade, artificial intelligence, or the war in Iran. Beijing officials had clearly stated before the visit that they wanted to focus heavily on Taiwan during these talks.
During a Fox News interview on Thursday evening, Trump made several large claims about the meetings. He stated that China agreed to buy American oil after his talks with Xi. He also bragged that Chinese leaders were committed to buying Boeing passenger jets and agricultural goods. Trump added that China would open its financial system to Visa. Despite making these big claims on television, he provided zero concrete details to back them up.
The diplomatic talks also produced very little progress regarding the conflict with Iran. Trump told reporters that Xi wants to see a peace deal between the fighting sides. He noted that China wants to keep the Strait of Hormuz open for global shipping. Trump also claimed that China refuses to support Iran, charging transit tolls in the vital waterway, and promised not to send military equipment to Tehran.
At the same time, Trump escalated his own threats against Iran. He told the press he was losing his patience with the country and urged Iranian leaders to accept a new trade deal. He threatened to launch more destructive military strikes against Iranian targets. Earlier in the week, he warned the public that the current ceasefire between the United States and Iran is on massive life support.
Other precious metals suffered heavy losses alongside gold this week as the market soured. Spot silver crashed 9% to settle at $75.9795 per ounce. Spot platinum slipped 5.1% to end the week at $1,985.20 per ounce.
Copper prices also took a major hit as the strong dollar scared away industrial buyers. Benchmark copper futures on the London Metal Exchange fell 1.5% to settle at $13,938.50 a ton. Meanwhile, United States copper futures dropped 4.9% to close at $6.2895 a pound.
Neil Welsh, the head of metals at Britannia Global Markets, explained the sudden drop in copper. He said the metal retreated from a record-high close because high inflation ruined the chances of rate cuts. Welsh also noted that record copper prices have finally started to kill demand in China, as metal fabricators see their incoming orders drop significantly this month.
