Gold (XAU/USD) and Silver (XAG/USD) prices declined on Friday amid renewed hostilities in the Middle East and mounting expectations of Federal Reserve interest rate hikes. Silver surrendered early gains, sliding 0.73% to near $59.50 during the European trading session, as fears of a prolonged US-Iran conflict and higher oil prices fueled concerns about persistent inflation and a hawkish Fed stance [1]. The CME FedWatch tool indicates an almost 80% probability of at least one Fed rate hike this year, which is negative for non-yielding assets like Silver [1]. Meanwhile, a sharp recovery in the US Dollar Index (DXY), trading near 100.87 after revisiting a three-week low of 100.60, further pressured Silver prices [1].
Gold also traded on the back foot, with XAU/USD around $4,098, down 0.60% on the day and heading for a weekly loss [2]. Gold posted its worst quarterly performance in thirteen years, following a two-year rally that peaked near $5,600 in January [2]. The metal has struggled to attract buying interest, behaving more like a rate-sensitive asset than a traditional safe haven since the US-Iran war broke out in February [2]. According to the CME FedWatch Tool, markets are pricing in a 58% chance of a rate increase at the Fed's September meeting [2]. Technical analysis shows Gold remains below key resistance levels, with momentum subdued and selling pressure dominant [2].
Source 3 reports Gold nursing minor losses around $4,100, set for a 1.6% weekly depreciation, as the resumption of hostilities in Iran boosted oil prices and pressured central banks to hike rates [3]. The US Dollar Index has bounced from three-week highs, approaching 101.00, limiting Gold's upside attempts [3]. While technical indicators hint at weakening bearish momentum, there is no clear sign of a trend shift, and Gold must overcome resistance at $4,175 and $4,200 to signal a reversal [3]. Support levels are noted between $4,020 and $3,885 [3].
Both Gold and Silver markets are awaiting the release of the US Consumer Price Index (CPI) data for June, scheduled for Tuesday, which could influence expectations for the Fed's interest rate path in the coming months [1][2]. Analyst opinions across sources suggest that unless geopolitical tensions ease and inflation concerns subside, precious metals are unlikely to stage a sustained recovery, given the Fed's commitment to returning inflation to its 2% target [2].
CONCLUSION
Gold and Silver prices are under pressure due to renewed Middle East tensions, higher oil prices, and strong expectations of Fed rate hikes. The US Dollar's recovery and subdued momentum in precious metals reinforce a bearish outlook. Upcoming US CPI data will be closely watched for further direction, but current sentiment remains negative as markets anticipate continued monetary tightening.