Gold prices were on track for a second consecutive weekly drop, as surging energy prices dimmed prospects for near-term U.S. interest rate cuts.
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Gold prices slipped on Friday and were on track for a second consecutive weekly decline, pressured by a stronger dollar and inflation worries driven by the Iran war, which weighed on rate‑cut expectations.
Spot gold fell 0.5% to $5,052.15 per ounce, and was down over 2% for the week so far. U.S. gold futures for April delivery settled 1.3% lower at $5,061.70.
“While the market remains strongly bullish gold long term on asset allocation drivers, bullion is grinding towards lows since the Iran conflict started with the dollar at nearly four-month highs,” said Tai Wong, an independent metals trader.
The U.S. dollar was on course for a weekly rise, making greenback-priced bullion less affordable for other currency holders.
Commerzbank in a note said expectations of a more restrictive monetary policy are the main reason why the price of gold has come under pressure.
While gold is prized as a traditional hedge against inflation and periods of uncertainty, elevated rates typically curb its appeal by increasing the cost of holding bullion.
Data showed U.S. consumer spending increased slightly more than expected in January, which together with continued strength in underlying inflation and the war in the Middle East bolstered economists’ views that the Federal Reserve would not resume cutting interest rates for some time.
President Donald Trump said the U.S. was going to be hitting Iran “very hard over the next week”, shortly after issuing a partial 30-day waiver for purchases of sanctioned Russian oil. Oil prices dipped but were on track for weekly gains as Gulf disruptions due to the conflict broadly persisted.
Elsewhere, resumption of some flights from Dubai has allowed gold flows from this major global trading hub to restart partially this week, three sources told Reuters.
Among other metals, spot silver lost 3.3% to $81.00. Platinum fell 4% to $2,047.20 and palladium shed 2.5% to $1,569.00. The sister metals are on track to post weekly losses.