Gold prices moved lower on Friday and were headed for a third straight weekly decline, pressured by a strengthening US dollar and the Federal Reserve's increasingly hawkish stance, which reduced the appeal of the non-interest-bearing asset, according to The Times of India.
Precious Metals Price Movements
Spot gold slipped 0.6% to $4,184.33 an ounce by 0211 GMT and was down 0.9% for the week. US gold futures for August delivery also weakened, falling 1% to $4,202.10 per ounce. Among other precious metals:
- Spot silver declined 1.5% to $64.83 per ounce
- Platinum fell 1.3% to $1,674.47 per ounce
- Palladium eased 0.8% to $1,268.65 per ounce
| Metal | Spot Price | Daily Change | Weekly Change |
|---|---|---|---|
| Gold | $4,184.33 | -0.6% | -0.9% |
| Silver | $64.83 | -1.5% | -- |
| Platinum | $1,674.47 | -1.3% | -- |
| Palladium | $1,268.65 | -0.8% | -- |
Key Drivers: Hawkish Fed and Strong Dollar
The primary pressure on gold comes from the Federal Reserve's increasingly hawkish stance under Chairman Kevin Warsh. Projections released after the Fed's latest policy meeting showed that nine of the 19 policymakers now anticipate at least one interest rate increase this year, even though the central bank left rates unchanged at its first meeting under Warsh's leadership. Market expectations for a US rate hike in December have risen sharply, with traders now assigning an 87% probability to such a move, compared with 61% before the Fed's latest decision, according to the CME FedWatch Tool. Since gold does not generate interest income, higher interest rates tend to reduce its attractiveness relative to yield-bearing assets.
Tim Waterer, Chief Market Analyst at KCM Trade, commented that gold's gains following the US-Iran peace agreement faded quickly as renewed strength in the dollar took centre stage after the Federal Reserve adopted a firmer tone under Chairman Kevin Warsh. According to Waterer, the market's focus has shifted back to monetary policy, with the Fed's stance outweighing the positive geopolitical backdrop that had briefly supported bullion.
Geopolitical Developments and Inflation Concerns
On the geopolitical front, oil tanker traffic resumed through the Strait of Hormuz, while the US announced on Thursday that it had lifted its blockade on Iran. Inflation concerns linked to the Iran conflict have also prompted several central banks around the world to either raise borrowing costs or signal their intention to tighten policy further. These factors contribute to the broader monetary tightening environment that weighs on gold.
Revised Forecast: Goldman Sachs Lowers Gold Target
Goldman Sachs now expects gold to reach $4,900 an ounce by December, lower than its previous forecast of $5,400, after revising its outlook to reflect the view that the Fed is unlikely to cut rates this year. The revision underscores the impact of the Fed's hawkish stance on the precious metals outlook.
Outlook for Precious Metals
With the dollar strengthening and rate hike expectations rising, gold and other precious metals face continued headwinds. The market will closely monitor upcoming Fed communications and economic data for further clues on monetary policy trajectory. For commodity traders and analysts, the shift in Fed tone and the resulting dollar strength remain the dominant factors driving precious metals prices, outweighing the temporary support from geopolitical developments.
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