TLDR
- Gold dropped around 2% on Friday, heading for a third consecutive weekly loss
- The Federal Reserve’s hawkish tone from Chair Kevin Warsh boosted the dollar and Treasury yields
- Nine of 19 Fed policymakers expect at least one rate hike later this year
- An interim US-Iran peace deal briefly supported gold earlier in the week but failed to hold gains
- Switzerland talks on a final peace accord were suspended, adding uncertainty
Gold is on track for its third weekly loss in a row as Federal Reserve rate hike expectations and a stronger US dollar weigh on the precious metal.
Spot gold fell around 1.8% to $4,134 an ounce on Friday. US Gold Futures dropped 2.2% to $4,152. Gold is set to lose roughly 2% for the week.
The metal had gained at the start of the week after the US and Iran announced an interim peace deal. But those gains reversed after the Fed’s Wednesday policy meeting.
Fed Tone Shifts Markets
New Fed Chair Kevin Warsh struck a hawkish tone at the meeting, sending Treasury yields higher and pushing the US dollar to its strongest level since May 2025.
The US Dollar Index surged 0.8% on Thursday. A stronger dollar makes gold more expensive for buyers outside the US, reducing demand.
Nine of the Fed’s 19 policymakers now expect at least one rate increase later in 2025. Futures markets are pricing in over an 80% chance of a year-end rate hike.
Higher interest rates raise the cost of holding gold, which pays no interest or dividends. Strategist Christopher Wong at Oversea-Chinese Banking Corp said gold historically underperforms before a first rate hike.
Wong added that it remains unclear whether this would be a one-off insurance hike or the start of a full tightening cycle. He said if it is not a new cycle, gold could recover.
Iran Deal Fails to Prop Up Prices
The US-Iran interim agreement was expected to reopen the Strait of Hormuz to commercial shipping. Shipping traffic has begun returning to the waterway following the US declaration that its blockade had ended.
However, Switzerland announced that planned talks on a final peace accord would not go ahead on Friday. US Vice President JD Vance reportedly suspended the Geneva negotiations, raising doubts about how durable the agreement is.
Analysts said it could take months for oil and gas volumes through the strait to return to normal. Oil prices rebounded on Friday after falling sharply earlier in the week, which brought back some inflation concerns.
Silver fell 2.5% to $64.09 per ounce. Platinum dropped 1.4% to $1,674. Copper futures also slipped on both the London Metal Exchange and in the US.
The Bloomberg Dollar Spot Index was up 0.9% for the week, adding further pressure across commodities.
Gold’s path in the near term will likely depend on whether the Fed follows through with a rate hike and how the US-Iran peace process develops.
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