Gold Holds Near $4,275, Heads for Weekly Loss as Fed Rate Hike Expectations Grow
Gold prices were little changed on Friday and remained on track for a weekly decline of more than 3%, as elevated energy prices and rising U.S. Treasury yields continued to reinforce expectations of further Federal Reserve policy tightening.
As of 10:41 GMT, spot gold (XAU/USD) was nearly unchanged at $4,274.89 per ounce, while Gold Futures gained 0.3% to $4,309.72. Silver (XAG/USD) slipped 0.1% to $63.79, and platinum (XPT/USD) edged down 0.1% to $1,754.17. Meanwhile, the U.S. Dollar Index climbed 0.1% to 101.29.
Hormuz Uncertainty Keeps Oil and Inflation Risks in Focus
Oil prices stabilized after surging on Thursday as the United States and Iran remained unable to reach a final agreement on reopening the Strait of Hormuz, a critical route for global energy supplies.
Reports indicate that negotiators are exploring a phased deal that would allow Tehran to reopen the strategic waterway while Washington eases port restrictions. The possibility of continued disruptions to energy flows has supported oil prices and fueled concerns that higher fuel costs could slow the decline in inflation.
The energy market remains a key factor for gold traders, who are assessing whether renewed inflationary pressure from rising oil prices could push the Federal Reserve toward additional monetary tightening following last week’s interest rate increase—the first rate hike in three years.
Higher interest rates and Treasury yields typically weigh on gold because the precious metal does not generate interest income. U.S. bond yields rose sharply on Thursday, with the 30-year Treasury yield approaching 5.5%, its highest level in more than two decades.
The rise in yields has also strengthened expectations that borrowing costs could remain elevated for longer, creating additional headwinds for non-yielding assets such as gold.
Investment Demand Remains Resilient Despite Macro Headwinds
According to analysts at ANZ, investment demand for gold has remained resilient, with no significant liquidation observed so far despite increasingly challenging macroeconomic conditions.
This suggests that the recent decline in gold prices has not triggered widespread investor exits, highlighting continued confidence in the metal as a long-term store of value.
However, the short-term outlook for gold remains closely tied to movements in oil prices, Treasury yields, and expectations surrounding the Federal Reserve’s next policy decision.
Further increases in energy costs could keep inflation concerns elevated, while higher yields and a stronger U.S. dollar are likely to continue exerting pressure on gold prices.