Gold drops, set for muted weekly close

Spot gold declined 0.4 per cent to $4,526.50 an ounce, while gold futures dropped 0.4 per cent to $4,528.37/oz

Gold prices dropped in Asian trade on Friday and were headed for a muted weekly close as markets remained uncertain over the U.S.-Iran war and its impact on interest rates.

Spot gold declined 0.4 per cent to $4,526.50 an ounce by 05:24 GMT, while gold futures dropped 0.4 per cent to $4,528.37/oz.

Spot prices were set to lose nearly 0.2 per cent this week, having logged sharp swings on mixed signals from Iran and the U.S. on ongoing negotiations.

Elsewhere, U.S. inflation surged in the past two months on higher oil prices. This in turn sparked increased speculation that the country’s central bank may be forced into hiking interest rates this year.

The minutes of the central bank’s late-April meeting showed this week that an increasing number of policymakers supported raising interest rates– a scenario that bodes poorly for gold and other non-yielding assets.

Gold remains caught between two forces: lower yields/oil are supportive, but any renewed spike in crude quickly revives inflation and Fed-tightening concerns, OCBC analysts said in a note.

For now, the near-term bias is less bearish than earlier in the week, but upside still looks capped unless oil and yields ease more decisively, they said.

A spike in bond yields had spooked metal markets in recent weeks. While yields did drop from recent highs this week, they still remained relatively high.

Other precious metals declined on Friday and were also headed for muted weekly performances. Spot platinum slipped 0.5 per cent to $1,961.44/oz, while spot silver declined 0.3 per cent to $76.825/oz.