Market Overview

Gold prices continued to decline on Friday and were on track for a third consecutive weekly loss. The main pressure came from a stronger U.S. dollar and hawkish signals from the Federal Reserve, which weakened the appeal of the precious metal.

At the time of writing, spot gold was down 0.5% at USD 4,189.26 per ounce. U.S. gold futures for August delivery fell 0.9% to USD 4,207.80 per ounce.

Strong Dollar Pressures Gold

The U.S. dollar hovered near a one-year high, making gold more expensive for investors holding other currencies. This was one of the key factors weighing on gold demand in the short term.

For a non-yielding asset like gold, a strong dollar and expectations of higher interest rates are typically negative factors. When yields and the dollar both rise, investors tend to become more cautious toward precious metals.

Fed Holds Rates Steady but Remains Hawkish

The Federal Reserve kept its policy rate unchanged in the current 3.50% - 3.75% range at Kevin Warsh’s first policy meeting as Chair.

However, markets reacted strongly to the Fed’s updated projections. According to the projections released after the meeting, 9 out of 19 Fed policymakers now believe that another rate hike may be needed this year to combat inflation.

This pushed expectations for monetary easing further back and added more pressure on gold.

Geopolitical Tensions Ease

Another factor affecting gold was the situation around the Strait of Hormuz. Oil tankers continued sailing through the strait after the United States said it had lifted its blockade on Iran as part of an interim agreement.

This helped ease some concerns over energy supply. However, key issues between the U.S. and Iran remain unresolved, meaning geopolitical risks have not fully disappeared.

Still, as tensions cooled and oil-related pressure eased, safe-haven demand for gold also weakened.

Goldman Sachs Lowers Gold Forecast

Goldman Sachs now expects gold prices to reach around USD 4,900 per ounce by December, lower than its previous forecast of USD 5,400 per ounce.

The main reason is that the bank no longer expects the Fed to cut interest rates this year. This reflects a major shift in the monetary policy outlook, as markets increasingly accept the possibility that interest rates could stay higher for longer.

Other Precious Metals Also Decline

Gold was not the only precious metal under pressure during the session.

Spot silver fell 0.8% to USD 65.32 per ounce.
Platinum lost 0.9% to USD 1,680.87 per ounce.
Palladium declined 0.5% to USD 1,272 per ounce.

This shows that the pressure was not limited to gold, but spread across the broader precious metals market.

Dubai Gold Market Development

While gold remains under short-term pressure, global gold trading infrastructure continues to develop. Dubai’s commodities exchange is set to launch a same-day settlement gold futures contract, aiming to capture safe-haven demand and improve liquidity in the emirate’s bullion market.

This suggests that demand for gold still exists, but in the near term, price direction remains heavily dependent on the Fed, the U.S. dollar, and interest rate expectations.

Conclusion

Gold prices are under pressure as the U.S. dollar strengthens and the Fed signals a more hawkish stance on inflation. With several Fed officials now seeing the need for another rate hike this year, expectations for rate cuts have been pushed further back, reducing gold’s appeal.

In the short term, gold may continue to face downside pressure if the dollar remains strong and real yields continue to rise. However, geopolitical risks, safe-haven demand, and long-term gold buying activity remain important factors to monitor.

Markets will now focus on inflation data, comments from Fed officials, and movements in the U.S. dollar to determine whether gold can recover or extend its third consecutive weekly decline.

📌 This content is for market perspective sharing only and does not constitute a buy or sell recommendation or investment advice.

Source: Reuters