Gold prices moved lower during Asian trading on Friday as growing doubts over a potential diplomatic breakthrough between the United States and Iran boosted demand for the U.S. dollar and reinforced expectations that interest rates could remain elevated for longer.
Investors also turned their attention to the upcoming U.S. nonfarm payrolls report, which is expected to provide fresh insight into the health of the labor market and the Federal Reserve’s policy outlook.
Bullion Set for Sharpest Weekly Drop Since May
Spot gold fell 0.8% to $4,440.84 per ounce by 23:45 ET (03:45 GMT), while gold futures declined 0.8% to $4,467.01 per ounce.
The precious metal was on course to lose roughly 2.2% for the week, marking its steepest weekly decline since early May.
Escalating Iran Conflict Pressures Safe-Haven Demand
Gold came under pressure as military exchanges between the United States and Iran intensified and reports suggested that Tehran had stepped back from negotiations.
Optimism surrounding a possible peace agreement weakened further after Hezbollah rejected a ceasefire proposal involving Israel, while fighting in southern Lebanon continued. Iranian officials have repeatedly stated that a ceasefire in Lebanon is a prerequisite for any broader regional agreement.
The latest developments have reinforced expectations that the conflict could persist, supporting energy prices and increasing inflation concerns.
Higher Rate Expectations Weigh on Precious Metals
Investors increasingly believe that rising inflation risks could encourage central banks, particularly the Federal Reserve, to maintain a more restrictive policy stance.
Higher interest rates generally reduce the appeal of non-yielding assets such as gold, a trend that has weighed on bullion prices since the outbreak of the U.S.-Israel conflict with Iran in late February.
Other precious metals also declined. Spot silver fell 1.7% to $72.6320 per ounce and was down 3.5% for the week, while platinum lost 0.9% to $1,880.76 per ounce and was on track for a weekly decline of 0.9%.
Payrolls Report Seen as Key Market Catalyst
Attention now turns to the May nonfarm payrolls report, scheduled for release later on Friday.
Economists expect the data to show a further slowdown in hiring as businesses contend with geopolitical uncertainty and moderating economic growth.
A stronger-than-expected reading could reinforce the Federal Reserve’s ability to keep interest rates unchanged for longer, or potentially tighten policy further later this year. Payroll data has exceeded expectations in four of the last six months.