Gold prices edged lower on Friday, heading toward a second consecutive weekly loss, weighed down by the strength of the dollar and higher oil prices, two factors that have reinforced expectations of a rate hike by the U.S. Federal Reserve. Meanwhile, crude rose on the back of uncertainties surrounding a potential deal between Iran and the United States aimed at ending the war.
The spot price of gold fell 0.48% to around $4,521 per ounce as of 9:40 GMT. The precious metal is thus down about 0.3% for the week so far.
U.S. gold futures for June delivery also fell 0.32%, at $4,528.
This retreat comes as the dollar rises, hitting its highest level in six weeks, making gold, priced in dollars, more expensive for holders of other currencies.
Edward Meir, an analyst at Marex, said that “what pushes gold down is the strength of the dollar, itself supported by the maintenance of globally high interest rates.”
Dollar Index
The dollar index stood at 99.23 points against a basket of currencies, not far from its peak of 99.515 points reached in the previous session, its highest level since April 7.
The greenback received additional support after data showing a drop in U.S. unemployment claims last week, while manufacturing activity in May reached its highest level in four years, underscoring the strength of the world’s largest economy.
The rise of the dollar also comes amid mixed signals regarding the prospect of a deal between Washington and Tehran to end the war that began on February 28. Divergences persist notably around Iran’s uranium stockpile and the issue of control of the Strait of Hormuz, despite statements by U.S. Secretary of State Marco Rubio, who spoke of “some positive signals” in discussions between his country and Iran.
The euro fell 0.03%, to $1.1613, while the pound remained steady at $1.3431.
The British currency was set for a weekly gain of around 0.8%, after having fallen more than 2% last week amid the UK political crisis.
The strength of the dollar and the persistence of high oil prices also weighed on the Japanese yen, which struggled on Friday to stay above the 159-per-dollar threshold.
The yen fell 0.1%, at 159.09 per dollar.
Separately, CME Group’s FedWatch tool shows markets are pricing in a rate hike by the U.S. central bank before the end of the year, with a 60% probability that the move occurs by December.
Oil Prices
Oil prices rose on Friday, amid growing investor skepticism about progress in peace talks between the United States and Iran.
Brent futures rose 2.37%, to $104.95 a barrel around 9:53 GMT, while U.S. West Texas Intermediate futures gained 1.66%, to $98.01.
Both benchmarks had fallen about 2% on Thursday, ending at their lowest levels in nearly two weeks.
Satoru Yoshida, a commodities analyst at Rakuten Securities, said that “with the persistence of uncertainty surrounding the prospects of peace talks, oil prices are rising on expectations of prolonged Middle East instability and supply disruptions linked to the Strait of Hormuz.”
He added that “WTI is likely to remain in a range between $90 and $110 next week, as has generally been the case since the end of March.”
