Gold prices gained on Friday and were set for a weekly advance, as investors shunned risky assets and moved into safe haven areas such as bullion and the dollar. Uncertainty over peace talks between the U.S. and Iran and escalating fighting have battered sentiment.
Spot gold added 2.6% to settle at $4,492.74/oz. Gold Futures advanced 2.5% to settle at $4,520.40/oz.
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’Structural case for gold remains intact’ For the week, spot gold was on track for a gain of 0.4%, marking a modest comeback from its worst weekly performance in over four decades.
Still, the yellow metal has largely lost its shine as a safe haven asset during the current geopolitical crisis in the Middle East, weighed down by a stronger dollar and expectations for higher interest rates for longer in order to combat the inflationary shock from surging oil prices.
“The rebound we’re seeing in gold highlights how sensitive the market is to shifts in macro expectations. Earlier in the week, ‘higher-for-longer’ rate expectations pushed yields and the dollar higher, weighing on prices and prompting pressure on the market," Joseph Cavatoni, senior market strategist for North America at the World Gold Council, told Investing.com.
"Geopolitical risk is still present, but it’s interacting with inflation, energy prices, and monetary policy in a more complex way, meaning rates and currency moves are having a more immediate impact on price action," he said.
"In reality, this is more about a shift in what’s driving markets than any change in gold’s fundamentals, as the structural case for gold remains intact. Central bank demand continues to provide a strong foundation, and the broader backdrop of elevated debt and persistent uncertainty still supports gold as a portfolio diversifier," the strategist said.
"From here, volatility is likely to continue, but this looks more like short-term recalibration than the end of the rally,” Cavatoni added.
Spot gold remains nearly 15% lower since the start of the Iran conflict at the end of February. Observers have flagged that bullion’s shine may also have been dented by a spike to record peaks in January, with the yellow metal having since slipped by around 20%.
Trump extends key deadline, Iran says infrastructure attacked Friday’s trading session was marked by investors shunning risk and making for safe haven assets, as the fighting raged on in the Middle East. An extension of a key deadline by President Donald Trump for Iran to reopen the Strait of Hormuz or face U.S. attacks on energy facilities did little to lift the mood.
Iranian foreign minister Abbas Araghchi on Friday said Israel had struck two steel factories, a power plant, and civilian nuclear sites. The minister added that the attacks "contradicted" Trump’s extended timeline.
Trump previously issued an ultimatum to Iran last weekend in which he vowed to strike power plants in the country if it did not unblock the strait, a vital waterway through which roughly one-fifth of the world’s oil flows. Trump later said he would not do so until Friday after what he described as "very strong" discussions with Iran.
Tehran has publicly denied that any such negotiations with Washington are happening.
