Key Takeaways
- Gold declined up to 2.2% toward $4,550 per ounce, marking a weekly decline of approximately 3.4%
- April US producer price inflation recorded its largest yearly increase in four years; consumer price data similarly exceeded projections
- Market participants reduced Federal Reserve rate cut expectations, with some now anticipating potential rate increases
- The Hormuz Strait blockage persists amid Iran conflict, sustaining elevated energy costs and inflationary pressures
- ANZ Group revised its $6,000 gold forecast to mid-2027 from its previous early next year projection
Precious metals experienced significant pressure on Friday following US inflation reports that elevated the dollar and bond yields, diminishing the attractiveness of non-yielding assets.
Spot gold tumbled as much as 2.2% approaching $4,550 per ounce, heading toward a weekly decline of approximately 3.4%. The yellow metal has retreated more than 13% since the commencement of the Iran conflict.
Silver experienced steeper losses, plummeting as much as 7.1% during trading. It concluded the session approximately 6% lower at $78.50 per ounce. Both platinum and palladium registered declines as well.
The US Dollar Index advanced 0.3% on Friday and gained over 1% across the week. Dollar strength typically increases gold’s cost for international purchasers, generally suppressing demand.
Two-year Treasury yields reached multi-month peaks. Elevated yields diminish the appeal of assets like gold that generate no income.
Inflation Data Triggers Market Selloff
April producer price inflation in the United States accelerated at the swiftest annual rate since 2022. Consumer inflation figures also surpassed analyst forecasts. Retail spending indicators demonstrated resilient consumer activity despite elevated energy expenses.
The reports prompted traders to reduce expectations for Federal Reserve rate reductions in 2024. Certain market participants began incorporating potential additional rate hikes into their models.
Gold typically prospers during periods of uncertainty and inflation concerns, but when markets anticipate inflation will trigger tighter monetary policy, this advantage dissipates. Elevated interest rates raise the opportunity cost associated with gold ownership.
The Strait of Hormuz, critical for worldwide petroleum transit, remains impassable due to the continuing Iran military operations. Crude oil prices registered weekly gains, maintaining global inflationary pressures.
“Inflationary expectations, rising yields and dollar strength will likely maintain downward pressure on gold in the immediate term,” noted ANZ analysts Daniel Hynes and Soni Kumari. ANZ revised its $6,000 per ounce gold projection to mid-2027.
Geopolitical Tensions and Trade Talks Weigh on Markets
Market participants closely monitored the Trump-Xi Beijing summit for indications regarding trade relations and the Iran crisis. The discussions concluded without significant developments, though both nations characterized the dialogue as productive.
Chinese official media reported that both countries committed to preserving stable commercial relationships and coordinating on global matters. Trump described US-China relations as “very strong” and mentioned Xi’s offer of assistance regarding the Hormuz crisis.
Nevertheless, Trump subsequently posted on Truth Social about “the military decimation of Iran (to be continued!),” intensifying concerns about further conflict escalation.
Copper prices also weakened, with London Metal Exchange futures dropping 2.6% to $13,644 per ton. Copper had previously benefited from the AI-driven stock market rally, which the bond market turbulence disrupted.
India contributed additional negative sentiment for gold markets, implementing stricter import regulations to support the rupee following recent import duty increases. India represents the world’s second-largest gold consumer market.
Gold has consolidated within a narrow trading band since its sharp decline at the outbreak of the Iran conflict. Markets continue navigating between inflation concerns that could sustain elevated rates and economic growth worries that might ultimately compel central banks toward monetary easing.
