Gold prices slipped slightly on Friday and are now heading toward a second straight weekly loss, as a stronger U.S. dollar and rising oil prices increased expectations that the Federal Reserve may raise interest rates again soon.
Spot gold fell 0.4% to $4,522.89 per ounce by 02:22 GMT, while U.S. gold futures for June delivery also dropped 0.4% to $4,524.40 per ounce. So far this week, gold has lost around 0.3%.
The decline came as the U.S. dollar stayed close to its highest level in six weeks, making gold more expensive for buyers using other currencies.
Edward Meir said the strength of the dollar was the main reason behind the drop in gold prices. He explained that high global interest rates continue to support the dollar and put pressure on gold.
At the same time, rising oil prices have increased worries about inflation, especially as investors remain uncertain about the chances of a political breakthrough in ongoing international tensions. Higher inflation concerns are strengthening expectations that interest rates could stay elevated for longer.
Gold is usually considered a safe-haven asset and a hedge against inflation, but higher interest rates reduce its appeal because gold does not provide investors with interest or income.
Data from the CME Group FedWatch tool showed that markets now expect U.S. interest rates to rise before the end of the year, with a 60% chance of a rate hike by December.
Meanwhile, the administration of Donald Trump announced that the swearing-in ceremony for new Federal Reserve Chairman Kevin Warsh will take place on Friday at the White House.
In addition, Thomas Barkin said the reactions of businesses and consumers to current economic pressures will determine whether the Federal Reserve can overlook higher inflation or whether it may need to consider additional interest rate increases in the future.
