Gold Extends Decline to Fourth Session as Inflation Data Strengthens Dollar

Key Highlights

• Spot gold declined as much as 2.2% to approximately $4,550 per ounce, marking a weekly decline of roughly 3.4%
• April producer price data showed the largest annual increase in four years; consumer price figures also exceeded projections
• Market participants reduced Federal Reserve rate cut expectations while some started factoring in potential rate increases
• The Strait of Hormuz blockade continues amid Iran conflict, maintaining elevated energy costs and inflation concerns
• ANZ Group revised its $6,000 gold forecast to mid-2027 from earlier 2025 projections

Precious metals experienced significant declines on Friday following the release of stronger-than-expected US inflation figures, which boosted the dollar and Treasury yields while diminishing the attractiveness of non-yielding assets.

Spot gold declined as much as 2.2% to approach $4,550 per ounce and was heading toward a weekly decrease of approximately 3.4%. The yellow metal has retreated more than 13% since hostilities with Iran commenced.

Silver experienced more pronounced losses, plummeting as much as 7.1% during trading sessions. The white metal settled approximately 6% lower at $78.50 per ounce. Both platinum and palladium registered declines as well.

The US Dollar Index advanced 0.3% during Friday’s session and recorded a weekly gain exceeding 1%. When the dollar strengthens, gold becomes costlier for international purchasers, which generally suppresses demand.

Two-year Treasury yields reached their highest levels in several months. Elevated yields diminish the appeal of assets like gold that don’t generate income.

Inflation Data Behind Precious Metal Weakness

US producer price increases reached their fastest annual rate since 2022 during April. Consumer price metrics similarly surpassed analyst expectations. Retail sales figures demonstrated resilient consumer spending despite elevated energy expenses.

The inflation reports prompted traders to reduce their forecasts for Federal Reserve rate reductions in 2025. Some market participants even began incorporating the likelihood of additional rate hikes into their models.

Gold typically thrives during periods of uncertainty and inflation concerns, but when markets interpret inflation as necessitating higher rates, this advantage diminishes. Elevated interest rates increase the opportunity cost associated with holding gold.

The Strait of Hormuz, critical for global petroleum transportation, remains blocked due to the continuing Iran conflict. Crude oil prices were poised for weekly advances, sustaining inflationary pressures worldwide.

Trump-Xi Meeting and Iran Tensions Weigh on Markets

Market participants closely monitored the Trump-Xi summit in Beijing for indications regarding trade policy and the Iran crisis. The discussions concluded without significant policy announcements, although both nations characterized the talks as productive.

Chinese official media reported that both countries committed to preserving stable commercial relationships and collaborating on global matters. Trump characterized the US-China relationship as “very strong” and noted that Xi had pledged assistance regarding the Hormuz crisis.

Copper also registered losses, with London Metal Exchange futures dropping 2.6% to $13,644 per ton. Copper had received support from the AI-driven equity market rally, which the bond market selloff disrupted.

India contributed to negative sentiment for gold, 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 fluctuated within a narrow band since experiencing sharp declines when the Iran conflict erupted. Markets continue navigating between inflation concerns that could sustain elevated rates and economic growth worries that might ultimately compel central banks to adopt accommodative policies.

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