Gold prices fell in Friday's session and are heading for their second consecutive week of decline as the strengthening USD and inflation concerns caused by the war in Iran weakened interest rate cut expectations.
Spot gold prices fell 0.7% to $5,020.15/ounce and have fallen more than 2% since the beginning of the week.
US gold futures for April delivery closed down 1.3% to $5,061.70/ounce.
Mr. Tai Wong - an independent metal trader - said that although the market is still strongly optimistic about the long-term outlook for gold based on asset allocation factors, this precious metal is gradually moving towards its lowest levels since the Iranian conflict began in the context of the USD rising to near its four-month high.
The USD is on an upward trend throughout the week, making gold valued in greenbacks more expensive for those holding other currencies.
Commerzbank said in a report that expectations of tighter monetary policy are the main reason for the pressure on gold prices.
Although gold is often seen as an asset to hedge against inflation and instability, high interest rates reduce the attractiveness of this precious metal because the cost of holding gold increases when gold does not yield returns.
Data shows that US consumer spending in January increased slightly higher than forecast. Along with core inflation still maintaining at a high level and the war in the Middle East, this reinforces economists' view that the US Federal Reserve (Fed) will not soon return to the interest rate cut cycle.
US President Donald Trump said that the US will attack Iran "very strongly" next week, immediately after issuing a 30-day partial immunity order on the purchase of oil from Russia, which is subject to sanctions.
Oil prices fell slightly but are still heading towards an upward week as supply disruptions in the Gulf region due to conflict continue.
In another development, the restoration of some flights from Dubai has helped the gold flow from this global trading center begin to resume part of the week, according to three Reuters sources.
On the other precious metal market, spot silver prices fell 3.3% to 81.00 USD/ounce.
Platinum prices fell 4% to $2,047.20/ounce and palladium fell 2.5% to $1,569.00/ounce. These two metals are also heading towards a week of price decline.
