Gold edges lower, set for weekly loss as oil fuels Fed hike bets

Investing.com — Gold prices edged lower on Friday and were on track for a weekly decline of more than 2%, as elevated energy prices and rising U.S. Treasury yields reinforced expectations that the Federal Reserve may need to raise interest rates further to contain inflation.

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At 20:21 ET (00:21 GMT), XAU/USD fell 0.2% to $4,267.13 an ounce, while Gold Futures rose 0.1% to $4,302.22. XAG/USD fell 0.3% to $63.64, while XPT/USD slipped 0.1% to $1,753.37. The U.S. Dollar Index was little changed at 101.3.

Hormuz uncertainty keeps oil, inflation risks in focus

Oil prices steadied after surging Thursday as the U.S. and Iran remained at an impasse over reopening the Strait of Hormuz, a critical route for global energy supplies.

Negotiators were reportedly exploring a phased agreement that would allow Tehran to reopen the waterway while Washington lifts a port blockade. The prospect of disruption to energy flows has kept oil prices elevated and raised concerns that higher fuel costs could slow the pace of inflation easing.

That has become an important driver for gold, as investors assess whether renewed energy price pressures could force the Fed to tighten policy further after last week’s rate increase, its first hike in three years.

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Higher interest rates and bond yields generally weigh on gold because the metal does not offer interest income. U.S. Treasury yields rose sharply Thursday, with the 30 year yield approaching 5.5%, its highest level in more than two decades.

The rise has also fuelled concerns that elevated borrowing costs could persist for longer, adding to pressure on non yielding assets.

Investment demand remains resilient despite macro pressure

ANZ analysts said investment demand has stayed resilient, with no material liquidation so far despite increasingly challenging macroeconomic conditions.

That suggests the recent decline has not yet triggered a broad retreat from gold investment positions.

Still, the near term direction remains closely tied to oil prices, Treasury yields and expectations for the Fed’s next moves.

A further rise in energy costs could keep inflation concerns elevated, while higher yields and a stronger dollar would add to the pressure on gold.