Gold Prices Decline Amid Geopolitical Tensions
Gold prices fell in Asian trade on Friday as hopes for a U.S.-Iran peace deal waned. Rising expectations for inflation and higher interest rates drove flows into the U.S. dollar, putting downward pressure on the non-yielding asset.
Market Eyes U.S. Payrolls Data
Investors focused on the upcoming U.S. nonfarm payrolls report for cues on the labor market and the potential path of interest rates this year. Spot gold dropped 0.8% to $4,440.84 per ounce by 23:45 ET (03:45 GMT), while gold futures fell 0.8% to $4,467.01 per ounce.
Weekly Losses and Geopolitical Pressures
Gold is on track for its worst weekly loss since early May, with spot prices set to decline roughly 2.2% this week. The metal has been weighed down by escalating geopolitical tensions in the Middle East, including renewed attacks between the U.S. and Iran.
Hopes for a peace deal were further dampened after Iran-backed Lebanese group Hezbollah rejected a ceasefire with Israel, while Tehran had previously indicated a Lebanon ceasefire as a prerequisite for broader negotiations. These developments suggest a prolonged U.S.-Iran conflict, likely supporting higher oil prices and inflationary pressures.
Inflation Expectations and Central Bank Moves
Rising inflation expectations are increasing the likelihood of more hawkish moves by global central banks, particularly the Federal Reserve. Since the start of the U.S.-Israel-Iran conflict in late February, high interest rates have diminished gold’s appeal as a non-yielding asset.
Other precious metals also fell on Friday and faced weekly losses. Spot silver declined 1.7% to $72.63 per ounce, down 3.5% for the week, while spot platinum fell 0.9% to $1,880.76 per ounce, also down 0.9% for the week.
U.S. Payrolls to Influence Rates
The May U.S. nonfarm payrolls report, expected later on Friday, is anticipated to show further cooling in job growth amid the ongoing Iran conflict and slower economic expansion.
The labor market and inflation remain the Federal Reserve’s primary considerations for interest rate adjustments. A stronger-than-expected payroll reading could allow the Fed to keep rates unchanged or even justify rate hikes later this year. Historically, nonfarm payrolls have surprised to the upside in four of the past six months, adding to market uncertainty.
