Gold about to mark weekly loss on dollar's strength

Gold prices rose in European trading on Friday for the first time in the past three days, supported by relatively active safe-haven buying. Despite this rebound, the metal is still on track for a second consecutive weekly loss due to the broad strength of the US dollar in the foreign exchange market.

Higher energy costs have fueled concerns about accelerating inflation across most parts of the world and further reduced the likelihood of near-term interest rate cuts by the Federal Reserve. To reassess those expectations, investors are awaiting a series of key US economic data releases later today.

Price Overview

Gold prices today: gold rose 1.0% to $5,128.64, up from the session opening level of $5,079.62, after hitting a low of $5,061.80.

At Thursday’s settlement, gold fell 1.85%, marking its second consecutive daily loss due to the strength of the US dollar.

Weekly performance

Over the course of this week’s trading, which officially ends with today’s settlement, gold prices are down about 1.0% so far and are heading toward a second consecutive weekly loss.

US dollar

The dollar index rose 0.55% on Friday, extending gains for the fourth consecutive session and reaching a four-month high of 100.30 points, reflecting the continued broad strength of the US currency against a basket of global currencies.

As is widely known, a stronger US dollar makes gold, which is priced in dollars, less attractive to buyers holding other currencies.

The rally comes as investors continue buying the dollar as a preferred safe-haven asset, with the Iran war approaching its third week and fears growing that the conflict could widen across the Middle East. This has pushed energy prices sharply higher and increased negative pressure on the global economy.

Global oil prices

Oil prices surged sharply as Iran escalated attacks on oil facilities and transportation infrastructure across the Middle East, raising fears of a prolonged conflict and potential disruptions to global oil flows.

Iran’s new Supreme Leader, Mojtaba Khamenei, pledged on Thursday to keep the Strait of Hormuz closed. The Iranian military command warned the previous day that the world should prepare for oil prices reaching $200 per barrel after three more ships were attacked in the blockaded Gulf.

US interest rates

Amid rising oil prices, US President Donald Trump again called on Federal Reserve Chair Jerome Powell to cut interest rates.

According to the CME FedWatch tool from CME Group, markets are pricing a 99% probability that US interest rates will remain unchanged at the March meeting, while the probability of a 25-basis-point rate cut stands at 1%.

Markets are also pricing a 95% probability that rates will remain unchanged at the April meeting, while the probability of a 25-basis-point rate cut stands at 5%.

To reassess these expectations, investors are closely monitoring a series of important US economic data releases today, including fourth-quarter economic growth figures, January personal consumption expenditures, and job openings data for the end of January.

Gold outlook

Tim Waterer, chief market analyst at KCM Trade, said that inflation concerns and questions about the Federal Reserve’s ability to cut interest rates if oil prices continue rising are somewhat reducing gold’s appeal.

Analysts at Standard Chartered noted that gold coming under downward pressure for several weeks is not unusual when liquidity demand increases. They added that they maintain a positive long-term outlook and expect gold to resume its upward trend after the near-term profit-taking phase.

SPDR fund

Holdings of the SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, declined by 1.43 metric tons on Thursday, bringing the total to 1,075.85 metric tons.