Gold Reclaims Ground After Weak US GDP

Gold prices dropped below $5,050 per ounce on Friday as a strengthening US dollar and fading expectations for interest rate cuts outweighed the traditional safe haven appeal of the precious metal. The dollar strengthened as investors sought liquidity following the announcement of the largest wave of strikes yet against Iranian targets and the effective closure of the Strait of Hormuz. While geopolitical volatility typically drives bullion demand, the threat of persistent inflation from crude oil prices exceeding $100 per barrel has shifted the focus toward yield bearing assets. Market participants have largely discarded the possibility of rate cuts in 2026 as rising energy costs complicate the path toward price stability. This surge in the greenback and Treasury yields has forced liquidations as investors sell gold to cover margin calls and raise cash. The metal is now set for a second straight weekly decline despite the ongoing regional conflict.

Gold prices strengthened to trade above $5,110 per ounce on Friday as investors balanced persistent geopolitical tensions in the Middle East with cooling economic growth in the United States. While crude oil prices continue to fuel inflation fears, the release of revised data showing Q4 2025 GDP growth slowing to an annualized 0.7% has introduced new concerns regarding economic stability. The market currently sees reduced prospects for near term Federal Reserve interest rate cuts as officials weigh the inflationary impact of regional conflict against signs of a cooling economy. Meanwhile, global demand remains a supporting factor with China maintaining its gold buying streak while Indian demand remains subdued due to import duties and price sensitivity.

Gold edged above $5,080 per ounce on Friday, but still on track for a back-to-back weekly loss, as surging oil prices fueled inflation concerns. President Donald Trump and Iran’s new supreme leader Mojtaba Khamenei issued defiant remarks, with Trump stressing that stopping Iran from acquiring nuclear weapons takes priority over oil price concerns, while Khamenei vowed to keep the strategic Strait of Hormuz closed and warned that Iran could open additional fronts if US and Israeli attacks persist. The tensions pushed energy prices higher, stoking inflation worries and dampening expectations of Federal Reserve interest rate cuts. Markets see no chance of a reduction at next week’s meeting and only about a 70% probability of a cut later this year. Elsewhere, gold discounts in India hit a nearly decade-low this week as weak demand and avoidance of import duties weighed, while China extended gold buying into its 16th consecutive month.