Gold prices were on course for a third consecutive weekly decline on Friday, pressured by a strengthening U.S. dollar and expectations that the U.S. Federal Reserve could raise interest rates later this year.
Spot gold fell 1.1 percent to US$4,156.26 an ounce by early trading, its lowest level since June 11, while losses for the week reached about 1.4 percent.
U.S. gold futures for August delivery dropped 1.7 percent to US$4,173.30 an ounce.
The decline came as the dollar climbed to a one-year high, making gold more expensive for investors holding other currencies and reducing demand for the precious metal.
Analysts said the market was also reacting to a more hawkish tone from the Federal Reserve, which has signalled that further monetary tightening may still be needed despite concerns about slowing economic growth.
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“Gold’s rally on the back of the U.S.-Iran peace deal proved short-lived,” said Tim Waterer, chief market analyst at KCM Trade.
“The resurgent dollar, powered by the Fed’s newly hawkish tone, has stolen the spotlight,” he said.
Investors have been reassessing expectations for U.S. interest rates after updated projections from Federal Reserve policymakers showed a growing number favouring additional rate increases.
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Nine of the 19 policymakers at the U.S. central bank now believe interest rates will need to rise before the end of the year.
Financial markets have responded by increasing expectations of a rate hike in the coming months. According to CME FedWatch data, traders are now assigning an 87 percent probability to a rate increase by December, up sharply from around 61 percent before the Fed’s latest policy decision.
Higher interest rates generally reduce the appeal of gold because the metal does not generate interest income. Investors often shift funds toward interest-bearing assets when borrowing costs rise.
The latest weakness in gold prices also reflects changing investor sentiment following recent geopolitical developments.
Earlier gains had been supported by optimism surrounding efforts to ease tensions between the United States and Iran. However, uncertainty resurfaced after planned talks between the two countries in Switzerland were cancelled when U.S. Vice President JD Vance abandoned plans to travel to the meeting.
Despite the renewed uncertainty, investors appeared more focused on monetary policy and currency movements than geopolitical risks.
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Physical demand for gold remained mixed across major consuming markets.
In India, one of the world’s largest gold consumers, demand was described as modest despite prices falling to their lowest levels in about two and a half months. Traders reported that continued price volatility had encouraged buyers to remain cautious.
In China, the world’s largest consumer of gold, the market shifted to a discount, indicating softer demand as buyers held back from making significant purchases.
Trading activity was also lighter than usual as financial markets in mainland China and Hong Kong were closed for the Dragon Boat Festival holiday.
Other precious metals also came under pressure.
Spot silver fell 1.5 percent to US$64.81 an ounce, while platinum declined 0.8 percent to $1,681.53. Palladium dropped 0.8 percent to US$1,268.31 an ounce.
All three metals were also on track to record weekly losses.
Market analysts said investors would continue to monitor economic data, central bank commentary and geopolitical developments for clues about the future direction of interest rates and commodity prices.
For now, however, the combination of a stronger dollar and expectations of tighter monetary policy has placed gold on course for its third straight weekly decline, ending a period of strong gains driven by geopolitical uncertainty and safe-haven demand.
