Gold Slips for Fourth Week as Stronger Dollar and Fed Rate Hikes Loom

Gold prices slipped on Friday, moving closer to a fourth consecutive weekly drop. Spot gold eased 0.2% to $4,020.88 an ounce, while U.S. gold futures lost 0.3%, settling near $4,037.30 by early trading hours. This puts bullion on course for almost a 3% slide this week and about an 11% tumble over the month.

The U.S. dollar held strong near its highest level in over a year, eyeing a second week of gains. That strength makes gold more expensive for buyers dealing in other currencies, shaving off demand. The greenback's resilience ties back to expectations that the Federal Reserve will push interest rates higher to tame inflation that just refused to cool.

Commodities Prices >>

Thursday's data showed the U.S. personal consumption expenditures (PCE) price index-the Fed's favored inflation gauge-jumping 4.1% year-over-year in May. That's the steepest rise in over three years and the first time it's crossed the 4% mark since early 2023.

Markets price in about a 63% chance the Fed will hike rates again by September, according to the CME FedWatch tool. Higher rates generally dim gold's appeal since it doesn't pay interest or dividends, prompting traders to look elsewhere.

Following this backdrop, geopolitical strains lingered when a ship reported an attack near the Strait of Hormuz. Though a preliminary peace agreement between the U.S. and Iran eased tensions somewhat, the incident briefly pushed gold's safe-haven allure upward-but not enough to counterbalance the stronger dollar and hawkish rate bets.

Silver prices dropped 1.1% to $57.31 an ounce, eyeing a sharp 12% weekly plunge. Platinum ticked down 0.2% to $1,600.23, potentially marking its seventh straight weekly decline.

Metals beyond precious ones also took a hit: benchmark copper on the London Metal Exchange dipped 0.9% to $13,182.33 per ton. U.S. copper futures followed with a similar 0.9% loss, landing at about $69.01 a pound.

The interplay of a firm dollar, rising borrowing costs, and geopolitical uncertainty is testing metals markets. Whether this trend continues into the summer months remains a question traders are watching closely.