Gold Set to Suffer Third Consecutive Weekly Loss under Dollar Strength Pressure

SadaNews Economy - Gold prices are heading towards recording their third consecutive weekly loss, having dropped by more than 2 percent during Friday's trading, affected by the rise of the U.S. dollar to its highest level in a year, alongside increasing expectations for the continuation of the Federal Reserve's tight monetary policy.

The price of gold in the spot market fell by 2.1 percent to $4,121.95 per ounce by 05:08 GMT, recording its lowest levels since June 11, with weekly losses so far around 3.8 percent. U.S. gold futures for August delivery fell by 2.5 percent to $4,139.40 per ounce, according to "Reuters."

The pressures on the precious metal arose amid the dollar's rise to its highest level in a year, increasing the cost of purchasing gold for holders of other currencies and limiting its investment appeal.

Tim Waterer, chief market analyst at "KCM Trade," stated that the gains in gold following the announcement of the peace deal between the U.S. and Iran were short-lived, explaining that "the resurgence of the dollar's strength, supported by the more hawkish approach taken by Federal Reserve Chairman Kevin Warsh, quickly refocused markets on monetary policy."

He added that "the firm stance of the new Fed chairman succeeded in neutralizing the positive impact of geopolitical factors, reminding investors that monetary policy remains the most influential factor in market direction."

These expectations were reinforced after the Federal Reserve's estimates showed that nine out of 19 officials from the U.S. central bank anticipate the need for another rate hike during this year.

This outlook aligns with the trend of several global central banks towards maintaining tight monetary policies or indicating the possibility of raising borrowing costs to combat inflationary pressures associated with the fallout from the Iranian war.

According to the "FedWatch" tool, the chances of the Federal Reserve raising interest rates in December rose to 87 percent, compared to 61 percent before the last central bank decision.

Gold is considered an asset that is negatively impacted by rising interest rates, as it does not yield returns, which reduces its appeal compared to interest-bearing assets.

In this context, Goldman Sachs has revised its gold price forecast for the end of December to $4,900 per ounce, down from its previous estimate of $5,400, based on its prediction that the Federal Reserve will not lower interest rates during the remainder of the year.

On the geopolitical front, the Swiss Foreign Ministry announced the cancellation of the U.S.-Iranian talks that were scheduled to take place on Friday at the Swiss resort of Bürgenstock, adding more uncertainty to the diplomatic scene in the region.

Gold's losses were not limited to its category, as silver dropped by 3.9 percent to $63.25 per ounce, platinum fell by 2.7 percent to $1,649.63, and palladium decreased by 2.3 percent to $1,249.69 per ounce, with all precious metals heading towards notable weekly losses.