Gold prices experienced a significant pullback on Friday, dropping over 4 per cent as market speculation intensified regarding the potential appointment of a more hawkish Federal Reserve chair. Despite this sharp decline, the precious metal remains on track to record its most substantial monthly advance since 1982, underscoring its enduring appeal as a safe-haven asset during periods of geopolitical and economic uncertainty.
Friday's Market Movements and Monthly Performance
Spot gold lost 4.2 per cent, settling at $5,172.80 per ounce by 07:16 GMT, after an earlier slide exceeding 5 per cent. This retreat followed a record high of $5,594.82 reached on Thursday. Remarkably, gold prices have surged more than 20 per cent throughout January, positioning the commodity for its sixth consecutive monthly rise. This performance represents the largest single-month gain in over four decades, highlighting a robust bullish trend. US gold futures for February delivery mirrored the spot market's decline, falling 3 per cent to $5,163.90 per ounce on Friday.
Factors Driving the Price Decline
Analysts attribute the recent downturn to a confluence of factors. Tim Waterer, Chief Trade Analyst at KCM, noted, "A potentially less dovish Fed Chairman pick, a rebound in the dollar, and gold giving way to overbought conditions have contributed to the decline in the price of the precious metal." Market rumours have centred on former Fed Governor Kevin Warsh as a likely successor to current Chair Jerome Powell, following an announcement by US President Donald Trump on Thursday that he intends to reveal his pick on Friday.
Matt Simpson, a senior analyst at StoneX, elaborated, "Rumours that Kevin Warsh will replace Jerome Powell as Fed Chair have weighed on gold during Asian trade." The US dollar recovered from multi-year lows, partly supported by the Federal Reserve's decision to leave interest rates unchanged on Wednesday, though it remained poised for a second straight weekly decline. A stronger dollar typically makes greenback-priced gold more expensive for overseas buyers, applying downward pressure on demand.
Broader Market Context and Related Assets
Despite the pullback, the underlying demand for gold remains strong. Customs data revealed on Thursday that gold exports from Switzerland to the UK, home to the world's largest over-the-counter gold trading hub, jumped to their highest level since August 2019. This indicates sustained physical demand amidst the market volatility.
Other precious metals also experienced corrections. Spot silver slipped 6.1 per cent to $109.03 an ounce, after hitting a record high of $121.64 on Thursday. Silver has surged an impressive 53 per cent so far this month, positioning it for its best-ever monthly performance. Spot platinum lost 7.1 per cent to $2,443.65 per ounce after reaching an all-time high of $2,918.80 on Monday, while palladium dropped 7.3 per cent to $1,860.0.
In related financial markets, the Hang Seng Gold ETF surged more than 9 per cent on its trading debut in Hong Kong in the previous session, reflecting continued investor interest in gold-backed securities. Looking ahead, markets still anticipate two interest rate cuts in 2026, which could provide future support for non-yielding assets like gold.
