Gold prices fell slightly in Friday's trading session and are heading for their second consecutive week of decline as high oil prices increase concerns about inflation, thereby strengthening expectations that the Fed may raise interest rates this year.
As of 4:58 PM Vietnam time, spot gold prices fell 0.17% to 4,533.69 USD/ounce. Over the week, this precious metal has decreased by about 0.4%. US gold futures for June delivery also fell 0.4% to 4,524.20 USD/ounce.
Meanwhile, Brent oil prices continued to remain above the 105 USD/barrel mark as the market still doubted the possibility of a breakthrough in peace talks between the US and Iran.
Although Iranian media reported that the country's Foreign Minister met with the Pakistani Interior Minister on Friday to discuss proposals to end the conflict, caution in the energy market has not cooled down.
Mr. Ole Hansen - Head of Commodity Strategy at Saxo Bank said that oil prices, the USD and bond yields are still the main drivers for the gold market.
In the context that gold is having a fairly strong negative correlation with oil prices, the USD and bond yields, especially with crude oil, the diễn biến of these markets will continue to orient gold trends in the coming sessions," he said.
Rising oil prices often lead to higher inflation risks, increasing the possibility of interest rates remaining high for a long time. Although gold is considered an inflation hedging tool, high interest rates are detrimental to precious metals because gold does not generate profits.
According to CME Group's FedWatch tool, the market currently assesses the probability of the Fed raising interest rates by another 25 basis points in December at about 41%.
Meanwhile, the USD continued to maintain near its 6-week high, making gold more expensive for investors holding other currencies.
Technically, Mr. Ole Hansen said that the 200-day moving average around the 4,372 USD/ounce range and the 50-day moving average around the 4,667 USD/ounce range are currently playing the role of two important bounds of the gold market.
According to him, gold prices are likely to maintain a slight downward trend until the crisis in the Middle East shows clearer signs of cooling down.
In other developments, US President Donald Trump is expected to chair the inauguration ceremony of Mr. Kevin Warsh as Fed Chairman at the White House on Friday.
On other precious metals markets, spot silver prices fell 1.1% to 75.86 USD/ounce. Platinum prices fell 1.5% to 1,935.90 USD/ounce, and palladium fell 1.1% to 1,363.21 USD/ounce.
These precious metals are currently all heading towards a week of price declines.
