Gold prices edged higher during Asian trading on Friday as investors sought safe-haven assets amid the ongoing conflict in the Middle East, while markets awaited key United States economic data set for release later in the U.S. session.
By 3:30 pm AEDT (4:30 am GMT), spot gold was trading 0.5% higher at US$5,106.86 per ounce.
Despite the recovery, the precious metal remained on track to post its second consecutive weekly loss, as a more hawkish outlook for U.S. monetary policy offset the safe-haven demand generated by geopolitical risks.
Recent gains in the U.S. dollar have weighed on gold prices, with investors continuing to favour the greenback as a safe-haven currency amid heightened uncertainty in global markets.
The rally in oil prices has also played a key role in shaping market sentiment. Surging energy prices have raised concerns about renewed inflationary pressures and the potential impact on global economic growth.
Iran has intensified its actions in the region, attacking several tankers and vessels in Gulf waters while exerting control over commercial shipping through the Strait of Hormuz, a critical maritime passage that handles roughly 20% of global oil supplies.
Iran’s newly appointed Supreme Leader, Mojtaba Khamenei, reinforced the country’s stance in his first public remarks since taking office, saying the continued closure of the Strait of Hormuz should remain a “tool to pressure the enemy”.
The rising geopolitical tensions have helped sustain demand for the U.S. dollar, which has also benefited from its role as a so-called “petrocurrency” during periods of elevated energy prices.
At the same time, the surge in oil prices has lifted inflation expectations, prompting investors to reassess the likelihood of interest rate cuts by the U.S. Federal Reserve later this year.
Traders are also expected to reposition their portfolios ahead of next week’s Federal Reserve policy meeting, which could provide further clarity on the central bank’s outlook for inflation and interest rates.
Later on Friday, investors will monitor the latest U.S. economic releases, including a revision to gross domestic product data and the personal consumption expenditures price index, the Federal Reserve’s preferred measure of inflation.
