Key Highlights
- Spot gold decreased more than 1% on Friday, approaching four-week lows
- The precious metal has declined approximately 13% since the US-Iran conflict escalated in late February
- Major central banks from the US, Europe, and UK indicated potential interest rate increases
- Tehran’s Supreme Leader declared Iran would maintain control over the Strait of Hormuz
- Market experts maintain optimistic medium-term outlook for gold despite current downward pressure
The precious metal experienced another session of losses on Friday, extending a challenging period for bullion investors. Spot gold decreased as much as 1.2% to approximately $4,570 per ounce, maintaining proximity to its lowest point in four weeks.
The downturn follows a roughly 1% loss in April and nearly 12% retreat in March. Since tensions between Washington and Tehran intensified in late February, the metal has surrendered approximately 13% of its value.
The Middle East conflict has driven oil prices upward, sparking inflation anxiety throughout major global economies. This energy-related price pressure has redirected trader attention toward the greenback and away from precious metals.
The American currency has emerged as the primary safe-haven asset since hostilities commenced, displacing gold from the protective role it traditionally occupies during periods of international instability.
Major Central Banks Eye Tighter Monetary Policy
Federal Reserve officials expressed concerns this week regarding energy-driven price pressures. The European Central Bank, Bank of England, and Bank of Japan all suggested possible interest rate adjustments in coming months.
Elevated interest rates create headwinds for gold. They increase the opportunity cost of holding a non-yielding asset like the precious metal, enhancing the appeal of bonds and cash instruments by comparison.
Citigroup analysts noted in their research that downward pressure on the yellow metal could persist in the immediate term given ongoing Middle East uncertainties.
The metal did experience gains on Thursday following a sharp rise in the Japanese yen, which market observers attributed to official government intervention. A softer dollar typically elevates gold valuations since the commodity is denominated in US currency.
Tehran Reinforces Position on Strategic Waterway
US President Donald Trump announced he would continue a naval blockade targeting Iran and received briefings from military leadership on additional strategic options. Diplomatic negotiations between the two nations have yet to yield meaningful progress.
Iran’s Supreme Leader Mojtaba Khamenei released a statement Thursday affirming Iran would retain control of the Strait of Hormuz. He added that Tehran would safeguard its nuclear and missile capabilities.
Khamenei stated that Iranian oversight of Hormuz would deliver stability and economic advantages to Persian Gulf countries. His remarks came after reports emerged that Trump dismissed an Iranian offer to reopen the crucial waterway.
Iran has maintained an effective blockade of the Strait of Hormuz since conflict erupted in late February. The narrow passage serves as a vital conduit for international oil transportation.
Market activity on Friday remained subdued compared to typical volumes, as holidays throughout most of Asia kept participation limited.
Silver climbed about 1.4% to $74.10 per ounce. Platinum and palladium also registered modest gains.
Despite current headwinds, the majority of market analysts maintain a favorable outlook for gold. The World Gold Council’s most recent figures revealed central banks increased gold reserves in Q1 at the strongest rate in over a year.
JPMorgan’s head of precious metals research Greg Shearer noted that retail purchasing activity in China had provided price support, while central bank accumulation trends remained robust.
