Gold prices moved higher on Friday but remained on track for their steepest weekly decline in several weeks.
A stronger U.S. dollar and growing expectations of further Federal Reserve interest-rate increases continued to weigh on the precious metal.
Gold Prices Recover but Face Heavy Weekly Loss
Spot gold gained around 0.55% to $4,050.88 per ounce during Friday trading.
U.S. gold futures also rose by approximately 0.4% to $4,063.77 per ounce.
Despite the modest recovery, bullion was heading for a weekly decline of nearly 3%. Gold prices have also fallen by roughly 11% during the month.
Strong U.S. Dollar Pressures Gold
The U.S. dollar remained close to a 13-month high and was on course for a second consecutive weekly gain.
A stronger dollar makes gold more expensive for investors using other currencies. This can reduce international demand for the precious metal.
The greenback has received support from expectations that the Federal Reserve may need to tighten monetary policy further as U.S. inflation remains elevated.
U.S. Inflation Strengthens Fed Rate-Hike Bets
Data released on Thursday showed that the U.S. Personal Consumption Expenditures Price Index increased by 4.1% in May from a year earlier.
The PCE Price Index is the Federal Reserve’s preferred measure of inflation. The latest reading was the highest in more than three years and the first above 4% since 2023.
Persistent inflation has encouraged investors to increase their expectations of another interest-rate rise.
According to the CME FedWatch tool, markets were pricing in a 63% probability of a Federal Reserve rate increase by September.
Higher Interest Rates Reduce Gold’s Appeal
Higher interest rates are generally negative for gold because the metal does not provide investors with interest or dividend income.
When bond yields rise, income-generating assets can become more attractive than non-yielding investments such as bullion.
Expectations of tighter monetary policy have therefore placed significant pressure on gold prices despite continued economic and geopolitical uncertainty.
Middle East Tensions Limit Gold’s Decline
Geopolitical risks helped prevent steeper losses in the gold market.
Investors continued to monitor developments in the Middle East after a cargo vessel reported an attack near the Strait of Hormuz.
The incident highlighted continuing security risks despite a preliminary peace agreement between the United States and Iran.
The attack briefly increased safe-haven demand for gold. However, it was not enough to offset pressure from the stronger dollar and rising interest-rate expectations.
Silver Heads for Sharp Weekly Drop
Silver prices rose by around 0.47% to $58.17 per ounce.
However, the metal was heading for a weekly decline of approximately 12%, reflecting widespread weakness across precious metals.
Platinum Rises but Extends Weekly Losing Streak
Platinum climbed by roughly 4% to $1,608.23 per ounce during Friday trading.
Despite the sharp daily gain, the metal remained on course for its seventh consecutive weekly decline.
Copper Prices Trade Mixed
Benchmark copper futures on the London Metal Exchange fell by around 0.4% to $13,249.33 per tonne.
Meanwhile, U.S. copper futures gained approximately 0.45% to $6.10 per pound.
Overall, gold prices remain under pressure from a resilient U.S. dollar and growing expectations of tighter Federal Reserve policy. Although geopolitical uncertainty continues to support some safe-haven demand, bullion is still heading for a significant weekly loss.
