Gold prices saw a minor drop on Friday, impacted by a rising dollar. Despite this, the metal is set for a third straight weekly rise, supported by fresh optimism regarding a U.S.-Iran ceasefire, which has eased inflation worries and moderated expectations for increasing U.S. interest rates. Spot gold saw a decrease of 0.2%, trading at $4,755.84 per ounce as of 0055. This week, the metal has risen by 1.8% so far. U.S. gold futures for June delivery fell by 0.8%, closing at $4,779.20. Spot gold has dropped around 10% since the beginning of the U.S.-Israel conflict with Iran on February 28, highlighting notable changes in investor sentiment during the ongoing crisis.
The dollar index showed an upward trend, leading to a rise in the cost of gold priced in dollars for those holding other currencies. U.S. President Donald Trump announced a ceasefire in the six-week-old Iran conflict late on Tuesday, easing worries about prolonged disruption and addressing inflation concerns. This situation has led investors to modify their outlook on further rate hikes, creating a positive atmosphere for gold. Nonetheless, risks remain. On Thursday, Israeli Prime Minister Benjamin Netanyahu announced that he is seeking direct negotiations with Beirut, after a day of heavy bombardment in Lebanon that led to more than 300 deaths and briefly jeopardized the U.S.-Iran ceasefire.
Despite a strong dollar putting downward pressure on prices in the short term, the easing of geopolitical tensions and a more stable outlook for U.S. interest rates set the stage for weekly gains in bullion. Brent crude oil prices have dropped over 11% this week, easing inflation concerns as there is hope that the ceasefire could result in the reopening of the Strait of Hormuz, an essential route that typically supports about one-fifth of global oil trade. On the data front, the U.S. Personal Consumption Expenditures index, the Federal Reserve’s preferred inflation gauge, advanced 2.8% in the 12 months through February, aligning with estimates, and is expected to have increased further in March.
Investors are eagerly awaiting the release of March’s U.S. Consumer Price Index data, set to be announced later today. Markets are currently indicating a 31% chance of a U.S. rate cut of at least 25 basis points at the Federal Reserve’s December meeting, according to CME’s FedWatch Tool, up from the previous session’s 21% likelihood. SPDR Gold Trust, known as the largest gold-backed exchange-traded fund in the world, announced a reduction in its holdings by 0.14%, resulting in a total of 1,057.96 tonnes as of Wednesday. Spot silver rose by 0.1% to $75.11 per ounce, whereas platinum fell by 1.2% to $2,077.67, and palladium dropped by 1.1% to $1,540.03.