Gold Heads for Second Weekly Loss as Fed Rate Hike Concerns Weigh on Market
Gold prices declined on Friday and remained on track for a second consecutive weekly loss, pressured by persistent inflation concerns and growing expectations that the U.S. Federal Reserve could raise interest rates again. However, renewed hopes for a potential U.S.-Iran peace agreement helped limit further downside.
Spot gold fell 0.7% to $4,182.44 per ounce as of 09:18 WIB and was set to record a weekly decline of more than 3%. Meanwhile, U.S. gold futures for August delivery rose 2.2% to $4,203.87, supported by improving sentiment surrounding peace prospects in the Middle East.
The precious metal had dropped to a six-month low on Thursday before rebounding sharply and ending the session 3.5% higher. The recovery followed comments from U.S. President Donald Trump, who suggested that Washington and Tehran could reach a peace agreement as early as this weekend. Such a deal could potentially reopen the Strait of Hormuz and ease concerns over global energy supplies.
Despite the optimism, Iranian officials stated that no final agreement has been reached, leaving uncertainty over the region's outlook unresolved.
Broader market sentiment improved on hopes of a diplomatic breakthrough. Oil prices fell sharply after Trump's remarks, while global equity markets rallied as investors welcomed the possibility of reduced geopolitical tensions.
Gold, traditionally viewed as a hedge against inflation and geopolitical uncertainty, has faced pressure in recent weeks as investors increasingly focus on the prospect of tighter monetary policy. Higher interest rates raise the opportunity cost of holding non-yielding assets such as gold, making interest-bearing investments more attractive.
XAU/USD Outlook
Fresh U.S. economic data released on Thursday reinforced concerns that inflationary pressures remain elevated. Producer prices increased more than expected in May, recording the strongest annual rise in three and a half years as higher energy costs continued to filter through the broader economy.
The stronger inflation data prompted traders to increase bets that the Federal Reserve may resume monetary tightening later this year. Market pricing currently indicates roughly a 60% probability of a rate hike in December.
The U.S. Dollar Index traded largely unchanged during Asian trading hours after slipping 0.1% in volatile trading on Thursday.
Among other precious metals, spot silver declined 0.8% to $66.80 per ounce, while platinum gained 0.5% to $1,731.08 per ounce.
In industrial metals, benchmark copper futures on the London Metal Exchange climbed 1.6% to $13,706.33 per ton, while U.S. copper futures edged up 0.2% to $6.41 per pound.
Key Market Drivers
Persistent inflation concerns in the United States.
Rising expectations of a Federal Reserve interest rate hike.
Ongoing uncertainty surrounding U.S.-Iran peace negotiations.
Improved risk sentiment across global financial markets.
Fluctuations in energy prices and commodity demand.
Investors will continue monitoring inflation trends, Federal Reserve policy signals, and geopolitical developments, all of which are expected to play a crucial role in determining the next direction for gold prices and the broader commodities market.