Gold is heading for a weekly loss as the dollar rises economy

Gold fell today, Friday, with a decline in demand, as a result of expectations of a rise in US interest rates as the war in the Middle East continues, inflation levels increase, and the dollar exchange rate rises.

Gold fell in spot transactions by 2% to $4,558.36 per ounce, at the time of writing these lines, and near the lowest level since May 5 of this year.

Gold is heading towards recording weekly losses, as it has declined 3.4% since the beginning of the week. US gold futures for June delivery also fell 2.8% to $4,556.40.

Gold has fallen by about 13% since the beginning of the US-Israeli war on Iran on February 28.

On the other hand, standard 10-year US Treasury bond yields rose to their highest level in almost a year, as traders strengthened their expectations that the Federal Reserve (the US central bank) would be forced to raise interest rates this year.

Raising the interest rate on US Treasury bonds leads to increased demand for them by investors, given that their returns are guaranteed, and reduces demand for gold, leading to a decline in its prices.

The dollar’s exchange rate also rose against major currencies, making gold priced in the US currency more expensive for holders of other currencies.

Reuters quoted Rona O’Connell, an analyst at Stone

Increased inflation

The price of Brent crude oil increased 7.8% this week to trade above $109 per barrel, with the Strait of Hormuz remaining largely closed.

A series of inflation reports this week showed the risk that other goods and services would be affected by rising energy prices, dampening hopes for a cut in US interest rates in the near term.

O’Connell added, “Gold has remained cautious regarding the Gulf War for a long time, and the torrent of news coming out of India this week regarding import duties has exacerbated tensions in an already weak market.”

India imposed additional customs duties on gold and silver imports in an attempt to support the declining value of its currency (the rupee) and to enhance its foreign currency reserves that were affected by the war in the Middle East.

As for other precious metals, the price of silver in spot transactions fell 6.3% to $78.26 per ounce, platinum fell 3.1% to $1,991.33, and palladium fell 1% to $1,422.41. The three metals are heading to record weekly losses.

Dollar gains

In this context, the dollar rose slightly today, Friday, and is on its way to recording the largest weekly increase in more than two months.

Reuters quoted Francesco Pisol, an exchange rate analyst at ING, as saying: “The dollar is keeping pace with the strong data we saw this week.”

He added: “There seems to be a realization that the situation in the United States regarding the energy crisis may end up being much better than many other places in the world.”

The dollar index, which measures the performance of the US currency against a basket of 6 competing currencies, rose to its highest level in more than a month at 99.29, before falling slightly. But it is still up 1.2% per week, which is the largest weekly rise since early March.

The euro fell to its lowest level in a month at $1.1617, before recovering slightly. ⁠It is expected to lose 1.1% per week.

The yen did not see much change and remained around the level below 158 against the dollar, although local data indicate a sharp rise in wholesale price inflation, which enhances the possibility of the Bank of Japan raising interest rates soon.

The pound sterling reached its lowest level in five weeks against the dollar, and is on track to record the largest weekly decline since ⁠November 2024, at a time when Prime Minister Keir⁠Starmer is struggling to stay in power after the results of local elections last week.

The British pound fell in the latest trading by 0.2% to $1.3378, and 1.9% over the course of the week, which is the largest weekly decline since November 2024.