As investor mood was negatively impacted by higher inflation signals and prospects of additional US Federal Reserve tightening, gold prices fell on Friday and were on track to record a weekly loss.
By 0101 GMT, spot gold had dropped 0.3% to USD 4,200.82 per ounce, and it was expected to finish the week down 2.8%. In the meantime, US gold futures for delivery in August increased 2.6% to USD 4,222.10.
On Thursday, the precious metal hit its lowest point in almost six months before rising to close at USD 4,219.69. The bounce came after US President Donald Trump said that a peace deal may be achieved soon and that planned military action against Iran had been canceled.
According to Trump, a peace agreement between the US and Iran might be signed as early as this weekend, which could allow commercial shipping to resume through the Strait of Hormuz. Tehran retorted that no final decision had been reached on the matter.
Fresh US economic data that revealed producer prices increased more than anticipated in May—the biggest annual increase in three and a half years—also had an impact on market sentiment. One of the main causes of the surge was rising energy prices associated with Middle East tensions.
There is currently a 60% chance that US interest rates will rise in December, according to CME Group’s FedWatch Tool. Although gold has historically been seen as a hedge against inflation, rising interest rates often make the metal less appealing because it doesn’t produce yield.
Separately, DBS Group, based in Singapore, revealed intentions to provide tokenized physical gold to individual investors, citing the country’s desire to become a worldwide hub for gold trading as well as the rising demand for the precious metal.
Among other precious metals, palladium increased 1% to USD 1,281.75, platinum increased 0.3% to USD 1,724.45, and spot silver decreased 0.4% to USD 67.11 per ounce.
Gold Market Weekly Update
| Metric | Details |
|---|---|
| Spot Gold Price | USD 4,200.82 per ounce |
| Daily Change | -0.3% |
| Weekly Performance | -2.8% |
| US Gold Futures (August) | USD 4,222.10 per ounce |
| Previous Session Close | USD 4,219.69 per ounce |
| Gold Trend | On track for weekly decline |
| Main Market Driver | Rising inflation and US rate hike concerns |
| Fed Rate Hike Probability (December) | 60% |
| Impact on Gold | Higher rates reduce appeal of non-yielding assets like gold |
Key Factors Affecting Gold Prices
| Factor | Impact on Gold |
|---|---|
| Rising US Producer Prices | Negative |
| Higher Energy Costs | Increased inflation pressures |
| Expectations of Fed Tightening | Bearish for gold |
| US-Iran Peace Deal Hopes | Reduced safe-haven demand |
| Stronger Interest Rate Outlook | Pressures gold prices lower |
| Middle East Geopolitical Risks | Supports inflation concerns |
US Economic Indicators
| Indicator | Latest Update |
|---|---|
| US Producer Prices (May) | Biggest annual increase in 3.5 years |
| Key Inflation Driver | Rising energy prices |
| Market Expectation | Additional Federal Reserve tightening |
| Interest Rate Outlook | Higher-for-longer scenario gaining traction |
Other Precious Metals Performance
| Metal | Price (USD/Oz) | Daily Change |
|---|---|---|
| Gold | 4,200.82 | -0.3% |
| Silver | 67.11 | -0.4% |
| Platinum | 1,724.45 | +0.3% |
| Palladium | 1,281.75 | +1.0% |
Major Developments
| Event | Significance |
|---|---|
| Trump Signals Possible US-Iran Peace Deal | May ease shipping disruptions in the Strait of Hormuz |
| Tehran Response | No final agreement confirmed |
| DBS Group Gold Initiative | Plans to offer tokenized physical gold to retail investors |
| Singapore’s Goal | Strengthen position as a global gold trading hub |
Market Takeaway
| Bullish Factors for Gold | Bearish Factors for Gold |
|---|---|
| Geopolitical uncertainty | Rising US inflation |
| Safe-haven demand | Higher interest rate expectations |
| Central bank buying | Stronger dollar and bond yields |
| Physical gold demand | Reduced attractiveness of non-yielding assets |
