Gold Heads for Third Weekly Fall as Hawkish Fed Boosts Dollar

Gold fell to $4,150 per ounce on Friday, its lowest level since June 11, and was on track for a third consecutive weekly decline as a stronger US dollar and rising expectations for tighter monetary policy weighed on demand. The dollar climbed to a one-year high after the Federal Reserve left interest rates unchanged but signaled a more hawkish outlook. Nine of the Fed’s 19 policymakers now expect at least one rate hike later this year, while markets currently assign a roughly 70% probability of a rate increase by September. Adding to the bearish sentiment, Goldman Sachs lowered its year-end gold price forecast to $4,900 per ounce from $5,400 previously. The decline came despite ongoing geopolitical uncertainty after Switzerland announced that the planned US-Iran talks would not take place on Friday.

Gold decreased 2.01% to 4125.39 USD/t.oz

Gold dropped below $4,200 an ounce on Friday, wiping out gains from earlier in the week as hawkish signals from the US Federal Reserve outweighed the positive impact of the US-Iran peace agreement, which pushed oil prices lower and eased inflation concerns. On Wednesday, the Fed left interest rates unchanged as widely expected but indicated increasing support for interest rate hikes this year. Higher borrowing costs tend to reduce the appeal of non-yielding assets such as gold by increasing their opportunity cost. Meanwhile, investors welcomed signs of improving shipping conditions through the Strait of Hormuz after the US-Iran interim peace deal came into effect, ending a prolonged conflict that triggered the largest supply disruption on record. Still, traders remained cautious, with expectations that it could take months for shipping activity and energy flows to recover to levels seen before the conflict began in late February.