Investing.com – Gold prices rose more than 1% on Friday but ended the week with losses as a stronger dollar offset inflation concerns as the Federal Reserve hiked rates.
It rose 1.6% to settle at $4,090.26/oz, while gained 1.4% to settle at $4,103.00/oz. The former posted a weekly loss of 1.7% and a four-week decline, while the latter dropped 3.3%.
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Dynamics of change in interest rate expectations are being seen
Metals market participants are completely focused on the monetary policy outlook this week amid mixed signals from US economic data and oil prices.
May’s core personal consumption expenditures (PCE) price index – widely seen as the Fed’s preferred inflation gauge – rose slightly in May from April on both an M/M and Y/Y basis, matching economists and analysts’ expectations. The 3.4% Y/Y growth was the highest since October 2023. Meanwhile, headline PCE growth on both M/M and Y/Y basis also matched expectations, with the latter recording its highest growth since April 2023.
Despite the higher annual reading, monetary policy watchers reacted by modestly downgrading the Fed’s chances of raising interest rates this year and slightly raising their bets for the central bank to keep rates steady. The move was driven by the perception that the May PCE report had peaked in terms of price pressures, as oil prices fell sharply this week to levels just before the start of the Middle East conflict and eased inflation concerns.
The PCE data follows a major reassessment of the monetary policy outlook last week, when the Fed issued a more hawkish dot plot than expected. At least half the members of the Federal Open Market Committee now expect to raise rates this year due to the inflationary impact of rising oil prices. The high rate environment weighs on non-yielding assets like gold. They also strengthen the dollar, making gold less attractive to foreign buyers.
David Morrison, senior markets analyst at Trade Nation, said: “On Wednesday, gold fell below $4,000 to its lowest level since early November last year. Since then, it has managed to stage a modest rally, which briefly took it above $4,050. It is a relief that yesterday’s US inflation update came in line with expectations, which helped the US dollar fall. This certainly helped gold find some support. Milli, and bulls will now be hoping that the area around $4,000 will now act as support.” Said.
“But just as the dollar has fallen of late, gold also needs to rally. As a result, it may be too early to assume the ‘all clear’,” he said.
Bets on rate hikes this week also impacted other precious metals. There was a decline of almost 9%, compared to a decline of 2.3%.
Trump accused Iran of ceasefire violation
Turning to the Middle East, President Donald Trump on Friday said Iran fired at least four drones at ships passing through the vital Strait of Hormuz and targeted a cargo ship, in what he called a “stupid violation” of the ceasefire agreement between Washington and Tehran.
Although the president did not provide any further details or name the ship that was attacked, he was likely referring to the same ship that was said to have been attacked on Thursday. United Kingdom Maritime Trade Operations received reports of an attack on a cargo ship in the Strait of Hormuz near Oman, and the Wall Street Journal later said the ship was a Singapore-flagged cargo ship. always beautiful Which was attacked by Iran’s Islamic Revolutionary Guard Corps (IRGC).
Still, the decline eased on Friday, as overall shipping traffic through the Strait of Hormuz remained resilient despite the attack on the ship and Trump’s claims that it was a violation of the ceasefire.
Ayushman Ojha and Jaiveer Shekhawat contributed to this article