Gold prices suffered their steepest weekly decline in three years due to a strengthening US dollar and changing investor preferences.

Spot gold finished the week down more than 4% at $2,562.61 per ounce. US gold futures fell 0.2% to $2,567.10. In India, 10 grams of 24 carat gold fell by Rs 1,200 to Rs 75,813 in Delhi on Friday.

The decline came after Federal Reserve Chairman Jerome Powell signaled a more cautious approach to interest rate cuts, emphasizing the need to avoid hasty decisions. His comments changed market sentiment, reducing the likelihood of a December rate cut to 59% from 83% the day before, according to CME’s FedWatch tool.

The strengthening of the dollar has increased the difficulty of gold and made it more expensive for investors holding other currencies. While the dollar is poised for its biggest weekly gain in more than a month, U.S. Treasury yields have continued their rise, further reducing gold’s appeal. Higher interest rates often discourage investment in non-yielding assets such as gold.

Further adding to the pressure, US retail sales data exceeded expectations in October, indicating that the economy is resilient. This strengthened the thesis that interest rate cuts would be slower and reduced the safe haven appeal of gold.

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Rahul Kalantri, Vice President of Commodities at Mehta Equities, attributed the decline in gold prices to the rise of the dollar and the shift of investors’ interest in cryptocurrencies.

He added that Bitcoin’s record-breaking rise to $93,000 per coin has drawn attention away from traditional safe-haven assets such as gold.

LKP Securities Research Vice President Jateen Trivedi added that gold’s weakness below $2,550 was compounded by the dollar index rising above 106.50. He stated that the unexpected inflation reading increased concerns that the Fed might pause interest rate cuts, and this put additional pressure on gold.

Despite the decline in prices, analysts remain optimistic about the long-term potential of the yellow metal. The current decline in the market could be an opportunity for investors to accumulate gold.

However, it should not be forgotten that short-term gains may remain limited with increasing interest rates and stabilizing inflation.

(Disclaimer: The views, opinions, advice and recommendations expressed by experts/brokers in this article are their own and do not necessarily reflect the views of India Today Group. You are advised to consult a qualified broker or financial advisor before engaging in any actual investment or trading options. )