Gold prices remained under pressure on Friday, with bullion on track for a second consecutive weekly decline as investors assessed uncertainty surrounding negotiations between the United States and Iran alongside shifting expectations for U.S. interest rates.
By 3:50 pm AEST (5:50 am GMT), spot gold had fallen 0.6% to US$4,514.69 an ounce. For the week so far, the precious metal was down 0.6%.
Gold traded close to the US$4,550 level during Asian trade after volatile price action in the previous session, as traders balanced geopolitical risks against a strengthening U.S. dollar and rising interest-rate expectations.
The U.S. dollar regained momentum on Friday after pulling back from six-week highs against major currencies, reducing demand for non-yielding assets such as gold.
Market sentiment remained cautious as negotiations between Washington and Tehran continued without a clear breakthrough.
The United States and Iran maintained opposing positions on Thursday regarding Tehran’s uranium stockpile and control over the Strait of Hormuz, although U.S. Secretary of State Marco Rubio said there had been "some good signs" in discussions.
Despite signs of progress, uncertainty surrounding a potential Gulf peace agreement continued to cloud expectations for when the Strait of Hormuz could fully reopen, helping to keep oil prices elevated.
Persistently high energy prices have increased speculation that the U.S. Federal Reserve may need to raise interest rates again before the end of the year to counter inflationary pressures.
According to the CME Group FedWatch Tool, markets are pricing in a 41.5% chance of a 25 basis point (bp) hike by December, alongside a 15.5% chance of a 50bps hike.
Those expectations supported the U.S. dollar while limiting upside momentum for gold.
Trading activity was also expected to thin later in the North American session ahead of the extended Memorial Day weekend in the United States, with U.S. stock and bond markets closed on Monday and bond markets set to close early on Friday.
