Gold heads for weekly loss as markets await developments in US-Iran talks

Gold prices declined in European trading on Friday, extending their limited losses for a second consecutive session and heading toward a second straight weekly decline, pressured by the current rise in the US dollar while markets await further developments in peace talks between the United States and Iran.

The likelihood of at least one US interest rate hike this year has increased, especially after the release of the latest Federal Reserve monetary policy meeting minutes, which showed that members remain open to raising interest rates.

Price Overview

• Gold prices today: Gold prices fell 0.75% to $4,507.49, from the session opening level at $4,543.00, while recording a session high at $4,546.16.

• At Thursday’s settlement, gold prices lost less than 0.1%, resuming losses that had paused the previous day during recovery attempts from a two-month low at $4,453.60 per ounce.

Weekly Performance

Over the course of this week’s trading, which officially ends at today’s settlement, gold prices are currently down 0.75%, heading toward a second consecutive weekly loss.

US Dollar

The US Dollar Index rose 0.1% on Friday, maintaining gains for a second consecutive session near six-week highs, reflecting the continued positive performance of the US currency against a basket of major and secondary currencies.

As is well known, rising levels of the US currency make dollar-denominated gold bullion less attractive to holders of other currencies.

The dollar received strong support this week from rising US Treasury yields, as investors bet that the Federal Reserve System will raise interest rates at least once this year.

In addition to support from long-term US Treasury yields, investors continue favoring the US dollar as a safe haven amid close monitoring of developments in peace talks between the United States and Iran.

US-Iran Talks

• Iranian news agencies: The final version of the US-Iran agreement has been reached through Pakistani mediation, with an official announcement expected within the next few hours.

• US Secretary of State Marco Rubio said there are “good signs” regarding the possibility of reaching a peace agreement.

• Donald Trump: The United States is in the final stages of talks with Iran.

• Reports: Iran’s uranium stockpile and control over the Strait of Hormuz remain key points of disagreement between Washington and Tehran.

US Interest Rates

• Minutes from the Federal Reserve’s April meeting, released on Wednesday, showed that the majority of policymakers believe that “some additional tightening in monetary policy could become appropriate” if inflation remains above the central bank’s 2% target.

• Kevin Warsh will be sworn in later today as Chairman of the Federal Reserve before US President Donald Trump.

• According to the CME Group’s FedWatch Tool, markets are currently pricing in a 40% probability of a Federal Reserve rate hike in December, up from just over 16% at the beginning of May.

• Markets are currently pricing a 99% probability that US interest rates will remain unchanged at the June meeting, while the probability of a 25 basis point rate cut stands at 1%.

• Investors are closely monitoring the release of more US economic data, in addition to comments from Federal Reserve officials, in order to reassess those probabilities.

Gold Outlook

Edward Meir, analyst at Marex, said: “What is pushing gold prices lower is the strength of the US dollar, which in turn is being supported by the continued rise in expectations for interest rate hikes across most parts of the world.”

SPDR Fund

Holdings of the SPDR Gold Trust, the world’s largest gold-backed ETF, increased on Thursday by 0.85 metric tons, bringing the total to 1,037.70 metric tons.