Gold Weakens on Strong Dollar and Iran Tensions
The XAU/USD gold price weakened but remained above the psychological level of $4,500 per ounce during the Asian session on Friday (May 22). This weakening occurred as the US dollar remained strong near a six-week high, driven by expectations of a hawkish Federal Reserve (Fed) policy stance.
Uncertainty over the US-Iran peace talks also supported the dollar, while also suppressing gold demand. Key remaining obstacles include Iran's uranium enrichment and Tehran's control of the Strait of Hormuz, which adds to the geopolitical risk premium.
Investors are now ruling out the possibility of a Fed rate cut until the end of 2026. Instead, the market expects at least one rate hike before the end of the year, supported by concerns about consumer inflation due to high energy prices.
The April FOMC minutes showed that Fed officials were likely to maintain high interest rates or even raise them if inflation remains above the 2% target. The CME FedWatch Tool estimates a more than 60% chance of a 25 basis point hike at the December meeting. Rising US bond yields have strengthened the dollar and pressured non-yielding gold.
From a geopolitical perspective, a senior Iranian source stated that no agreement has been reached with the US, although some differences have narrowed. However, the uranium issue and the Strait of Hormuz remain key points of contention. US Secretary of State Marco Rubio emphasized Iran's plan to collect tolls in the Strait as an obstacle to a peace deal, while President Trump asserted that the US rejects tolls and will take back Iran's stockpile of high-enriched uranium.
This situation has kept the geopolitical risk premium high and strengthened the dollar, thus maintaining downward pressure on gold. Investors are expected to continue monitoring developments at the Fed and US-Iran negotiations as key factors determining gold's future direction. (asd)*
Source: Newsmaker.id
