Gold prices rose on Friday but were on track for their biggest weekly decline in six weeks as escalating tensions between the United States and Iran pushed up energy prices, fueling inflation concerns and expectations for a U.S. interest rate hike .
The price of an ounce of gold rose 1.03 percent to $4,017.39 today. Gold has fallen about 2.6 percent in the past week. The price of gold futures contracts on the Comex market in New York also rose 0.67 percent to $4,018.80.
The US dollar has risen for the second consecutive trading session, making gold more expensive for holders of other world currencies.
Analysts believe that the main factors behind the widespread gold sale were the strengthening of the US dollar and heightened inflation concerns in the world, which led to an increase in interest rates globally.
The United States has intensified its renewed airstrikes against Iran, hitting bridges and an airport. Tehran responded by firing at U.S. bases across the Middle East. The price of Brent crude oil has risen about 16 percent this week following the attacks.
Gold prices have fallen about 25 percent since the start of the war against Iran in late February, pressured by expectations that war-induced inflation could keep interest rates high for longer.
Although gold is traditionally seen as a hedge against inflation, higher interest rates typically put pressure on this non-yielding metal by increasing the appeal of yielding assets.
Recent data has reduced the likelihood of a rate hike at the next Federal Open Market Committee (FOMC) meeting, but global interest rates are still rising and the recent surge in oil prices may force the Federal Reserve to adopt a more dovish stance on US interest rate policy.
Traders are currently pricing in a 58% chance of a U.S. interest rate hike in September. Federal Reserve Vice Chairman Philip Jefferson indicated on Thursday that he would be open to raising rates if inflation indicators do not improve in the near term.
However, Goldman Sachs wrote in a note: “The share of gold in private sector portfolios remains low, and recent geopolitical developments, including the Iran conflict and broader tensions, may accelerate the trend of asset diversification beyond central banks and toward private investors.”
In other precious metals, silver rose 0.25 percent to $56.33 an ounce, while platinum fell 1.65 percent to $1,596.56 an ounce.
