Gold prices extended their decline during Friday's Asian trade, falling to fresh weekly lows as investors favoured the United States dollar amid expectations of further Federal Reserve interest rate increases and renewed uncertainty surrounding U.S.-Iran negotiations.
By 4:05 pm AEST (6:05 am GMT), spot gold was down 1.6% at US$4,138.74 an ounce, placing the precious metal on track for a third consecutive weekly loss.
Selling pressure persisted despite the recent peace agreement between the United States and Iran, which had initially improved market sentiment and reduced demand for traditional safe-haven assets.
However, geopolitical uncertainty returned after reports indicated that U.S. Vice President JD Vance had cancelled a planned trip to Switzerland for talks with Iranian officials, raising questions about the durability of the diplomatic process.
At the same time, the U.S. dollar remained firmly supported by a more hawkish outlook from the Federal Reserve, helping the greenback trade at its highest level in more than a year against a basket of six major currencies.
The stronger dollar has weighed heavily on bullion, making gold more expensive for holders of other currencies and reducing its attractiveness relative to interest-bearing assets.
The Federal Reserve on Wednesday left its benchmark interest rate unchanged at a range of 3.5% to 3.75%, in line with market expectations.
However, policymakers delivered a more hawkish message through the updated Summary of Economic Projections. The latest "dot plot" showed a notable shift in sentiment, with nine Federal Reserve officials now expecting at least one interest rate increase before the end of the year.
The central bank also removed language from its policy statement that had previously suggested its next move was likely to be a rate cut, reinforcing expectations that rates could remain higher for longer.
The prospect of further monetary tightening has strengthened support for the U.S. dollar while increasing the opportunity cost of holding non-yielding assets such as gold.
