Gold prices saw a rise on Friday but were on track for their third straight weekly decline, primarily due to a strong U.S. dollar and an assertive U.S. Federal Reserve.
Gold reached a more than one-week low on Friday. This decline was driven by rising U.S. Treasury yields and a strengthening dollar, alongside escalating inflation worries stemming from the Middle East conflict, which further solidified expectations for increased interest rates.
Spot gold dropped 2% to $4,556.46 per ounce, marking its lowest point since May 5. Over the week, prices have fallen more than 3%. U.S. gold futures for June delivery also saw a 2.7% decrease, settling at $4,561.50.
Edward Meir, an analyst at Marex, commented, “There was a sell-off across the precious metals for a couple of reasons. The dollar is quite strong today. We’re also seeing not just a U.S. increase, but a global increase in bond yield rates.”
Benchmark 10-year U.S. Treasury yields climbed to a near one-year high, thereby increasing the opportunity cost of holding non-yielding bullion. The dollar was poised for its strongest weekly gain in two months, rendering gold, priced in the greenback, more costly for international buyers.
U.S. President Donald Trump stated that his patience with Iran was depleting and that discussions with China yielded no significant breakthroughs on trade or concrete assistance to resolve the conflict.
He further added, “The Chinese truly didn’t offer much help in resolving the conflict, and we’re seeing crude oil move up, which reinforces the inflation narrative, proving very bearish for the metals.”
Crude oil prices have surged over 40% since the onset of the U.S.-Israel conflict involving Iran, contributing to elevated global inflation. Central banks typically raise interest rates during inflationary periods, which, in turn, diminishes the attractiveness of non-yielding bullion.
According to CME’s FedWatch Tool, traders have largely discounted the possibility of U.S. interest rate cuts this year, while expectations for a rate hike have increased.
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