Gold prices (XAU/USD) declined to approximately $4,470 during the early Asian session on Friday, reflecting heightened volatility driven by ongoing geopolitical tensions and anticipation of key US economic data [1]. The precious metal's decline comes as ceasefire negotiations between the US and Iran have stalled, despite US President Donald Trump stating that talks are in the 'final' stages, while Iran’s Foreign Minister reported a lack of progress [1]. This follows a recent escalation in violence, with Iran launching missiles and drones at Kuwait and Bahrain, resulting in one fatality and multiple injuries at Kuwait’s main airport after the US struck an oil tanker bound for Iran [1].
The lack of advancement in ceasefire discussions after the most severe violence in weeks has fueled concerns about inflation and expectations of sustained higher interest rates, both of which have weighed on gold, a non-yielding asset [1]. Bart Melek of TD Securities noted, 'Higher inflation expectations, associated with the negative supply shocks, have pushed yields across the curve higher, kept the USD firm, and prompted markets to begin pricing in a Fed hike in late 2026' [1].
Market participants are also closely watching the upcoming US Nonfarm Payrolls (NFP) report for May, which is expected to show an increase of 85,000 jobs and an unemployment rate steady at 4.3% [1]. Any unexpected weakness in the US labor market could undermine the US Dollar and potentially support gold prices in the near term, given gold's status as a USD-denominated commodity [1].
Central banks remain significant buyers of gold, with 1,136 tonnes (approximately $70 billion) added to reserves in 2022, the highest annual purchase on record, according to the World Gold Council [1]. Gold is widely viewed as a safe-haven asset and a hedge against inflation, with its price often moving inversely to the US Dollar and US Treasuries [1].
CONCLUSION
Gold prices have come under pressure due to stalled US-Iran ceasefire talks and expectations of persistent inflation and higher interest rates. The upcoming US employment data could be a key catalyst for gold's next move, especially if it surprises to the downside and weakens the US Dollar.