Gold prices edged lower on Friday and were poised for a weekly decline, pressured by a stronger US dollar and expectations of fewer Federal Reserve interest rate cuts. This downward trend occurred despite escalating geopolitical tensions in the Middle East, which typically boost safe-haven demand for the precious metal.
In Dubai, gold rates retreated as 24-carat gold dropped AED 1.75 to AED 404.25, while 22-carat gold fell by the same margin to AED 374.25. Similarly, 21-carat and 18-carat gold declined AED 1.5 each, settling at AED 359 and AED 307.5, respectively.
On the global front, spot gold prices decreased 0.57% to $3,354.49 as of 4:12 GMT and were down 2.2% for the week. US gold futures also slipped 1.09% to $3,370.92.
Fed’s Inflation Concerns Weigh on Gold
The Federal Reserve’s recent decision to maintain interest rates and its projection of only two quarter-point rate cuts this year put downward pressure on gold. Fed officials highlighted rising inflation risks due to tariffs, which could limit future monetary easing.
“Although two rate cuts are expected, inflationary pressures from tariffs may constrain the Fed’s ability to ease policy further,” explained Vijay Valecha, Chief Investment Officer at Century Financial.
Steady bond yields and a stronger US dollar also contributed to subdued gold prices. The dollar’s gain this week, marking its largest weekly rise in over a month, made gold more expensive for holders of other currencies, dampening demand.
Despite these headwinds, Valecha noted, “Gold remains supported by geopolitical tensions, fundamental factors, and central bank buying. Potential US involvement in Middle East conflicts could further increase safe-haven demand.”
Geopolitical Tensions Keep Gold Supported
Gold prices steadied amid escalating conflict between Israel and Iran, with no clear resolution in sight. The White House announced that President Donald Trump would decide within two weeks whether the US will intervene militarily, adding uncertainty to the markets.
Trump also reiterated calls for the Fed to reduce interest rates by 2.5 percentage points, underscoring the tension between monetary policy and market expectations.
Ole Hansen, Head of Commodity Strategy at Saxo Bank, observed, “After reaching a record $3,500 in April, gold is consolidating while awaiting the next bullish catalyst. Despite recent softness, strong demand from central banks and investors worried about inflation and debt risks continues to underpin bullion.”
Other Precious Metals Decline
Friday’s decline extended across the precious metals sector. Spot silver dropped 1.55% to $35.82, platinum fell 1.78% to $1,284.12, and palladium declined 0.73% to $1,042.87. Industrial metal copper also slipped 1.44% to $4.78 per pound.
