Gold extended its decline on Friday amid a broader market selloff triggered by elevated concerns over global inflation and its implications on central bank policies.
Spot gold fell as much as 3% towards the $4,500-per-oz. level, wiping out all its gains from the past two trading weeks.
The move coincided with a drop in stock markets, after bond yields surged across the globe as doubts mounted over how quickly Middle Eastern oil supplies can return to normal, while the U.S. dollar continued to rise. That has placed bullion under further pressure, as it tends to thrive when yields and the greenback are lower.
Sell-offs across precious metals occurred due to a strong dollar on Friday, as well as global increases in bond yield rates, Edward Meir, an analyst at Marex, told Reuters.
Other metals, including silver and copper, saw declines of 10% and 3% respectively to erase their earlier-week gains as well.
The commodities have been weakened by the Middle East conflict, as the closure of the Strait of Hormuz invoked worries of a global energy crisis and kept inflation concerns high. Gold has lost 13% since the Iran war started in late February.
Yield pressure still on
Meanwhile, a lack of breakthrough in China-U.S. talks with respect to ending the war did little to assuage concerns over inflation and, by extension, higher interest rates.
China offered little help in resolving the conflict and crude oil is moving up, further reinforcing the inflation trend which has been bearish for metals, Marex’s Meir added.
Earlier this month, gold had rebounded above $4,700/oz. on a US proposal to end the conflict, though no resolution was reached after days of back-and-forth talks.
Following the latest developments, the market is now pricing in a more than 50% chance of a rate hike next January, according to Kalshi.
Meanwhile in the near term, inflation expectation, higher yields and a stronger dollar might put more pressure on gold, ANZ Group Holdings analysts Daniel Hynes and Soni Kumari wrote in a note to Bloomberg. The Australian bank also deferred its $6,000 per oz. price target to mid-2027 from early next year.
Despite this week’s drop, bullion remains up by 6% on the year, helped by a record rally in January that saw prices surge to a record of nearly $5,600 per ounce.
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