The current gold price slipped below $3,350 after an easing of Middle East tensions led investors to shift away from the safe-haven asset.
Gold prices are set to record their first weekly decline of the month, on the back of a slight easing in Middle East tensions. Demand for the safe-haven asset has declined after fears of an imminent escalation of the conflict decreased.
During the Friday morning session in London, spot gold was trading at around $3,350 an ounce, down more than 2% for the week. This pullback follows a strong performance earlier this year, with the precious metal still up more than 25% year-to-date. It remains fairly close to its record peak of just above $3,500, which it recorded in April.
The decline in the gold price comes after officials from the White House outlined the US president’s immediate plans. Addressing reporters, a government spokesperson revealed that Donald Trump will make a decision within two weeks on whether to support Israeli strikes.
This suggested that the US is not ready to make any rash decisions that could lead to an immediate escalation in the Israel-Iran conflict. It also eased fears of a swift military intervention that might have disrupted energy markets and further fuelled inflation.
Increased interest in other precious metals
Over the past few days, interest has begun to move away from gold towards alternative precious metals. Some investors appear to be shifting towards platinum as a defensive play, citing gold’s elevated price levels.
In terms of pricing, platinum and silver both declined on Friday, while palladium edged higher. As for the gold price, forecasts from major investment banks remain divided. Goldman Sachs reiterated its current bullish stance, projecting gold will reach $4,000 an ounce by 2025. However, Citigroup has decided to take a cautious approach, anticipating a fall below $3,000 by 2026.
Elsewhere, the Bloomberg Dollar Spot Index slipped by 0.1% but remains up for the week, which may also be weighing on gold prices. A stronger dollar typically makes the metal more expensive for holders of other currencies, reducing demand.
Inflationary pressures could push the gold price down
This week, Federal Reserve (Fed) Chair Jerome Powell warned that inflationary pressures could persist, partly due to the impact of Trump’s proposed tariffs. That has led markets to scale back expectations for interest rate cuts this year.
Powell warned that Trump’s trade tariffs haven’t yet revealed their full impact. He added that the effects of the tariffs haven’t yet driven up consumer prices, but this will likely become evident over the summer months.
Higher inflation typically has a negative impact on the gold price, with the yellow metal usually performing better in low-rate environments due to its lack of yield.
Taking into account inflation, interest rates, and geopolitical risks, the gold price is being closely watched by investors, with its direction in the short term appearing increasingly uncertain.
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