Gold prices fell on Friday under pressure from inflation concerns and expectations that the US Federal Reserve might raise interest rates. Spot gold is moving toward a weekly loss as market participants closely monitor signals regarding the interest rate path.
Spot gold dropped 0.5% to $1,193.58 per ounce, positioning gold to close the week with a 3.1% loss.
Meanwhile, August gold futures in the US rose 2.5% to $1,215.30. This divergence in prices indicates continued market volatility.
Gold closed at $1,219.69 on Thursday after falling to its lowest level in over six months. This movement followed US President Donald Trump's announcement that planned military strikes against Iran were canceled and his recent signals toward a peace agreement.
A market analyst noted that prices are largely shaped by geopolitical developments. The same analyst suggested that if the Fed signals a rate hike, gold could fall below $1,000.
Since the start of the Iran conflict, gold has lost about 20% of its value. This decline is driven by expectations that rising energy costs could accelerate inflation and force central banks to keep interest rates elevated for longer.
In the US, producer prices rose more than expected in May, marking the largest annual increase in three and a half years, fueled by higher energy costs due to Middle East tensions.
Markets are pricing a 60% chance of a Fed rate hike in December, according to CME Group's FedWatch tool. This expectation adds pressure on non-yielding gold.
On Thursday, Trump said the US and Iran could sign a peace agreement as early as this weekend, potentially reopening the Strait of Hormuz to shipping traffic. However, Iran stated that no final decision has been made on an agreement.
The New York-based SPDR Gold Trust, the largest gold-backed exchange-traded fund, saw its assets decline about 0.3% to 923.89 metric tons on Wednesday. ANZ lowered its year-end gold price target by $400 to $1,200, citing price volatility.
Silver fell 0.5% to $17.03 per ounce, while platinum rose 0.7% to $1,731.41. Both metals are tracking weekly losses. Palladium increased 1.8% to $1,292.20, gaining about 5% since the start of the week.
