Gold prices fell in the European market on Friday, resuming a downward trend that briefly paused yesterday. The metal is approaching a four-week low and is on track for its second consecutive weekly loss, driven by rising global oil prices which have heightened fears of inflation and potential interest rate hikes.

Amidst the strongest internal opposition since 1992, the Federal Reserve kept interest rates unchanged for the third consecutive meeting on Wednesday, while warning of elevated inflation caused by energy costs.

Price Overview

*  Gold Prices Today: Gold fell by 1.25% to ($4,564.42), from an opening level of ($4,622.43), after reaching a session high of ($4,635.97).

*   At Thursday’s close, gold prices had risen by 1.75%, marking the first gain in four days as part of a recovery from a four-week low of $4,510.32 per ounce.

Global Oil Prices

Oil prices rose by an average of at least 1% in global markets, resuming their ascent near multi-week highs. This comes amid fears of renewed military confrontations between the United States and Iran and the continued closure of the Strait of Hormuz.

On Thursday, Iran stated it would respond with "long and painful strikes" on U.S. sites if Washington renews its attacks, and reaffirmed its claims over the Strait of Hormuz. Rising global oil prices are renewing concerns about accelerating inflation, which may push global central banks to raise interest rates in the near term—a sharp shift from pre-war expectations of rate cuts or prolonged pauses.

The Federal Reserve

At the conclusion of its third periodic monetary policy meeting this year, and in line with most forecasts, the Federal Reserve maintained interest rates on Wednesday. The Federal Open Market Committee (FOMC) voted 8 to 4 to keep the benchmark federal funds rate at the 3.50% to 3.75% range, the lowest level since September 2022.

The vote saw the largest dissent within the Fed since 1992, as some members no longer believe the central bank should signal a bias toward monetary easing. The policy statement noted that inflation remains "elevated" above the 2% target, impacted by high energy and shipping costs resulting from the naval blockade of Iran and the closure of the Strait of Hormuz.

In his press conference, Fed Chair Jerome Powell admitted that the conflict in the Middle East has created "new inflationary pressures" but stressed that the Fed would not hesitate to raise rates again if oil prices continue to rise.

U.S. Interest Rates

*   Following the meeting, according to the CME FedWatch Tool: Market pricing for the probability of keeping rates unchanged in June stood at 99%, with a 1% probability of a 25-basis-point cut.

*   To refine these probabilities, investors are closely monitoring upcoming U.S. economic data and comments from Federal Reserve officials.

Gold Performance Forecast

Kyle Rodda, an analyst at Capital.com, stated: "Market trading volume will be relatively thin due to public holidays, so we are at a crossroads, or at least waiting for the next catalyst that will cause a change in the market direction."

SPDR Fund

Gold holdings at the SPDR Gold Trust fell by 3.43 metric tons on Thursday, marking the seventh consecutive daily decline. The total dropped to 1,035.77 metric tons, the lowest level since October 16, 2025.

The Euro edged higher in the European market on Friday against a basket of global currencies, maintaining its gains for the second consecutive day against the U.S. dollar. This follows the European Central Bank’s monetary policy meeting, during which the bank warned of rising inflation risks stemming from the repercussions of the Iran war.

ECB President Christine Lagarde stated that the option of raising interest rates was discussed extensively, noting that the upcoming meeting in June will be the "appropriate time" to re-evaluate the path of monetary policy.

Price Overview

*  Euro Exchange Rate Today: The Euro rose against the dollar by less than 0.1% to ($1.1737), from an opening price of ($1.1731), after recording a session low of ($1.1725).

*   The Euro ended Thursday's trading up 0.45% against the dollar, marking its first gain in three days. This recovery followed a dip to a three-week low of 1.1655 dollars earlier in the session.

*   Throughout April, the Euro achieved a 1.55% gain against the dollar, its first monthly advance in three months. This rise was supported by temporary pauses in the Iran conflict and growing hopes for a permanent peace agreement in the Middle East.

The European Central Bank

In line with expectations, the ECB kept its key interest rates unchanged yesterday at 2.15%—the lowest level since October 2022—marking the seventh consecutive meeting without a change.

In its policy statement, the ECB highlighted elevated inflation risks and an increasing likelihood of an economic slowdown. These pressures are attributed to high energy prices resulting from the war with Iran and ongoing tensions in the Strait of Hormuz.

The bank emphasized that it remains data-dependent and will decide on a meeting-by-meeting basis without committing to a specific rate path, standing ready to adjust all tools to ensure inflation stabilizes at the 2% medium-term target.

Christine Lagarde

ECB President Christine Lagarde stated on Thursday that the Governing Council reached a unanimous decision to hold rates, despite a lengthy discussion regarding the "option to hike." She indicated that June will be the "appropriate time" to reassess the direction of monetary policy.

European Interest Rates

*   Following the meeting, money market pricing for a 25-basis-point rate hike by the ECB in June rose from 35% to 55%.

*   To refine these expectations, investors are awaiting further Eurozone economic data concerning inflation, unemployment, and wage levels.

The Japanese yen declined in the Asian market on Thursday against a basket of major and minor currencies, retreating from a two-year high against the U.S. dollar. This drop is attributed to correction and profit-taking activities, alongside data showing a slowdown in Tokyo's core inflation, which missed April expectations.

Despite the current retreat, the Japanese currency is on track to achieve its largest weekly gain since February, supported by the Bank of Japan's actual intervention in the foreign exchange market to bolster the local currency and curb excessive volatility.

Price Overview

*  Japanese Yen Exchange Rate Today: The dollar rose against the yen by approximately 0.5% to (157.33¥), from an opening price of (156.59¥), after hitting a session low of (156.51¥).

*   The yen ended Thursday’s trading up 2.4% against the dollar, marking its first daily gain in three days and its largest single-day advance since January 23, 2023. It touched a two-month high of 155.54 yen following the BoJ's intervention.

*   Earlier on Thursday, the yen had slumped to 160.72 per dollar, its lowest level since July 2024.

*   Thanks to official intervention, the yen ended April up 1.35% against the dollar, recording its first monthly gain in three months.

Tokyo Core Inflation

Data released today in Japan showed that the Tokyo Core Consumer Price Index (CPI) rose by 1.5% in April, lower than market expectations of 1.8% and down from the 1.7% recorded in March. 

Lower-than-expected price data indicates receding inflationary pressures on monetary policymakers at the central bank, thereby reducing the chances of Japanese interest rate hikes later this year.

Japanese Interest Rates

*   Following the inflation data, market pricing for a quarter-point rate hike by the BoJ at the June meeting fell from 75% to 65%.

*   Investors are awaiting further data on inflation, unemployment, and wages to refine these expectations.

*   BoJ Governor Kazuo Ueda stated this week that there is no immediate need to raise interest rates.

*   On Tuesday, the BoJ kept interest rates unchanged for the third consecutive meeting, warning of escalating inflationary pressures due to the repercussions of the war with Iran and high energy prices.

*   The vote to hold rates passed 6 to 3, with three members calling for a 25-basis-point hike to the 1.0% range.

Weekly Trading

Throughout this week's trading, which officially concludes with today’s price settlement, the yen is currently up approximately 1.25% against the U.S. dollar. It is poised for its fourth weekly gain in five weeks and its largest weekly advance since last February.

Japanese Authorities

Japan's top currency diplomat, Atsushi Mimura, stated on Friday that speculation remains widespread, issuing an explicit warning that Tokyo is ready to return to the markets just hours after its previous intervention. When asked about potential future moves, Mimura told reporters: "I will not comment on what we will do in the future. But I assure you that the Golden Week holiday in Japan has only just begun."

Mimura's remarks followed Finance Minister Satsuki Katayama’s warning on Thursday that the time for "decisive action" was approaching. She also urged journalists to keep their smartphones close throughout the holidays—a clear signal of Tokyo's readiness to deter speculators from exploiting thin liquidity to pressure the yen. Following her warning, the yen surged up to 3%, with sources telling Reuters that the BoJ indeed intervened in the market for the first time in nearly two years.

Oil prices retreated on Thursday shortly after Brent crude hit a four-year high, following reports that the U.S. military will brief President Donald Trump on potential military action against Iran.

Axios reported that U.S. Central Command is preparing to present Trump with plans for potential military action, citing two sources familiar with the matter. This comes after Trump reportedly rejected Tehran’s proposal to reopen the Strait of Hormuz, signaling that the naval blockade will persist until a broader nuclear deal is reached.

Global benchmark Brent crude futures fell 3.2% to $114.22 per barrel by 9:53 a.m. ET, after jumping to $126 earlier in the session—a wartime high. Meanwhile, U.S. West Texas Intermediate (WTI) futures dropped 1.4% to $105.38.

These movements follow a multi-day rally, with both Brent and WTI surging nearly 60% since the outbreak of the U.S. and Israeli-led war against Iran on February 28.

Warren Patterson, head of commodities strategy at ING, noted in a research memo: “The oil market has shifted from over-optimism to the reality of the supply disruptions we are seeing in the Persian Gulf.” He added: “The longer these disruptions last, the less the market can rely on inventories, and the greater the need for demand destruction. The only way to achieve that is through higher oil prices.”

Goldman Sachs estimated that oil exports through the Strait of Hormuz have dropped to approximately 4% of normal levels amid stalled negotiations and the ongoing U.S. blockade. Analysts at the bank noted that Iran’s limited exports and storage capacity could exacerbate supply disruptions if the blockade persists, adding that increased production from the UAE following its OPEC exit would likely be gradual and insufficient to offset current market tightness.

Trump issues new threat to Iran

Trump appeared to issue a fresh threat to Iran in a post on Truth Social, stating the country "better get smart soon."

He added: "Iran can’t get its act together. They don't know how to sign a non-nuclear deal. They better get smart soon!" The post was accompanied by an AI-generated image showing him holding a weapon with explosions in the background and the caption "No more Mr. Nice Guy."

Bill Perkins, Chief Investment Officer at Skylar Capital Management, said oil markets are being driven by a mix of physical disruptions, geopolitics, and investor psychology as traders closely monitor tanker movements and political signals. “We are some ways off from a deal, and it may take more time or further escalation to open the Strait of Hormuz,” he said.

While strategic reserves and oil-in-transit have helped cap price increases, Perkins noted that refined product markets are under greater pressure, with diesel prices soaring and logistical bottlenecks expected to persist even if a ceasefire is reached.

Goldman Sachs also pointed to downside risks to demand, explaining that global oil consumption in April could be about 3.6 million barrels per day lower than February levels, with weakness concentrated in jet fuel and petrochemical feedstocks.

Regarding the outlook, Perkins stated that oil prices could rise to between $140 and $150 per barrel if disruptions continue, though such high levels would eventually curb demand.