Gold Prices Head for Second Consecutive Weekly Loss Amid Fed Rate Hike Concerns

Gold prices moved lower on Friday and remained on track for a second straight weekly decline as investors weighed persistent inflation pressures and growing expectations that the U.S. Federal Reserve could raise interest rates later this year.

At the same time, renewed optimism surrounding a potential peace agreement between the United States and Iran helped improve risk sentiment across financial markets, limiting demand for safe-haven assets such as gold.

Spot gold fell 0.7% to $4,182 per ounce and was set to record a weekly loss of more than 3%.

Iran Peace Hopes Improve Market Sentiment

Gold experienced significant volatility following comments from U.S. President Donald Trump, who stated that Washington and Tehran could reach a peace agreement as soon as this weekend.

The announcement raised hopes that the Strait of Hormuz could reopen fully to shipping traffic, reducing concerns about disruptions to global energy supplies.

Although gold briefly rebounded after the comments, Iranian officials later clarified that no final agreement had been reached, leaving uncertainty over the outcome of the negotiations.

Oil Falls and Stocks Rally

Financial markets responded positively to the possibility of a diplomatic breakthrough.

Oil prices declined sharply as traders reduced the geopolitical risk premium that had been supporting energy markets. Meanwhile, global stock markets moved higher as investors embraced a more risk-on environment.

As a traditional safe-haven asset, gold tends to face selling pressure when investor confidence improves and capital shifts toward equities and other growth-oriented assets.

Inflation Data Fuels Rate Hike Expectations

Gold also came under pressure from stronger-than-expected U.S. inflation data released on Thursday.

Producer prices increased more than analysts had forecast in May, recording the largest annual gain in three-and-a-half years. Rising energy costs were a major contributor to the increase, highlighting ongoing inflationary pressures within the economy.

The data reinforced concerns that inflation remains elevated and may require additional monetary policy tightening from the Federal Reserve.

Markets Increase Bets on Federal Reserve Action

Following the inflation report, traders increased expectations that the Federal Reserve could resume raising interest rates before the end of the year.

Market pricing currently implies roughly a 60% probability of a rate hike by December.

Higher interest rates are generally negative for gold because the metal does not generate interest or yield. As borrowing costs rise, investors often prefer interest-bearing assets such as bonds and cash equivalents.

US Dollar Remains Stable

The U.S. Dollar Index traded largely unchanged during Asian trading hours after experiencing volatile price action earlier in the week.

A stronger or stable dollar can also weigh on gold prices by making the precious metal more expensive for buyers using other currencies.

Precious Metals Show Mixed Performance

Other precious metals posted mixed results on Friday.

Silver declined 0.8% to $66.80 per ounce, while platinum gained 0.5% to $1,731 per ounce as investors selectively rotated within the metals sector.

Copper Continues Higher

Industrial metals outperformed precious metals, supported by expectations of resilient global demand.

Benchmark copper futures on the London Metal Exchange rose 1.6% to $13,706 per ton, while U.S. copper futures added 0.2% to $6.41 per pound.

The gains reflected continued optimism about long-term demand from infrastructure projects, electrification trends, and artificial intelligence-related investment.

Outlook for Gold

Gold’s near-term direction will likely depend on the balance between geopolitical developments and Federal Reserve policy expectations.

While ongoing uncertainty in the Middle East may provide some support for safe-haven demand, persistent inflation and the prospect of higher U.S. interest rates continue to create significant headwinds for the precious metal.

Investors will closely monitor upcoming economic data and central bank commentary for further clues on the future path of monetary policy and gold prices.