Gold was on track for a weekly loss of 3.2% on Friday, pressured by inflation concerns and growing expectations that the US Federal Reserve could raise interest rates.
Spot gold fell 0.5% to $4,191.17 per ounce by 02:52 GMT, while August futures contracts rose 2.4% to $4,212.70. The metal had touched its lowest level in more than six months on Thursday before closing higher at $4,219.69, after US President Donald Trump cancelled planned military strikes against Iran and signalled a peace deal could be imminent.
Edward Meir, analyst at Marex, said prices are “being driven entirely by geopolitical news.” He added that markets would pay close attention to any signals from the Fed on rates, warning: “If it hints at moving in that direction, I think gold could fall below the $4,000 barrier.”
Gold has shed around 20% since the war with Iran began, as fears that rising energy costs would stoke inflation have pushed expectations of tighter monetary policy. Higher interest rates increase the opportunity cost of holding a non-yielding asset like gold. US producer prices rose more than expected in May, posting their largest annual increase in three and a half years, with energy products among the main contributors. CME’s FedWatch tool shows traders currently pricing in a 60% probability of a US rate hike in December.
On the diplomatic front, Trump said Thursday that the US and Iran could sign a peace agreement early next week, which would reopen the Strait of Hormuz to shipping. Iran responded that it had not yet reached a final decision on the deal.
Among other precious metals, silver fell 0.4% to $67.10 per ounce and platinum rose 0.7% to $1,731.40, with both heading for weekly losses. Palladium gained 1.6% to $1,289.33 and was on course for a weekly gain of 5%.
