Gold Strengthens, But One Factor Holds Back Its Gains
Gold prices (XAU/USD) strengthened on Friday, paring some of the previous session's losses, as the precious metals market recovered, supported by safe-haven demand. However, gold remains on track for its first weekly decline in five weeks as escalating Middle East conflicts pushed up oil prices, fueled inflation concerns, and led the market to lower expectations for the Fed's interest rate hike.
From a macro perspective, a strengthening US dollar poses a major challenge for dollar-denominated gold sellers. A stronger dollar typically dampens buying interest because it makes gold more expensive for non-US buyers, while higher yields increase the opportunity cost of holding zero-coupon assets like bullion.
This pressure is compounded by the Fed's policy narrative. Several Fed officials are said to be leaving open the possibility of further tightening if inflation remains above target, prompting the market to be more cautious in pricing interest rate cuts. The combination of a strong dollar and higher interest rate expectations typically dampens gold's upside, although geopolitical risks continue to dampen selling pressure.
On the geopolitical front, the war entered its seventh day as Iran launched missile and drone attacks in the Gulf region, including a reported attack on an oil refinery in Bahrain. Israel continued airstrikes on Tehran, while the US suspended operations at its embassy in Kuwait, keeping the market in a risk-off mode, although gold's movement was not entirely in one direction.
Statements from officials also added to the mix. US President Donald Trump said Iranian officials contacted him to try to reach a deal to end the war, but he considered it "too late" and claimed the US was pushing Iran. Meanwhile, Iranian Foreign Minister Abbas Araghchi stated that Tehran had not requested a ceasefire and had no intention of negotiating, while the Revolutionary Guards warned that retaliatory attacks would escalate in the coming days.
Market participants now await US employment data, particularly Nonfarm Payrolls (NFP), which is expected to be around 59,000 for February after January's reading of 130,000, as well as the release of Retail Sales, which is projected to decline 0.3% monthly. Furthermore, attention is also focused on US tariff policy, including the planned temporary 15% global tariff and its potential readjustment in the coming months, which could potentially influence inflation expectations and the Fed's policy. (asd)
Source: Newsmaker.id
