Dollar Strengthens, Gold Struggles to Recover in Global Markets
Gold prices (XAU/USD) moved near their daily low during the European session on Friday (May 22nd), but managed to hold above the psychological level of $4,500 per ounce. The strengthening of the US dollar to a six-week high, driven by the Federal Reserve's hawkish outlook, dampened demand for the precious metal.
Traders have completely discounted the possibility of a Fed rate cut throughout 2026 and now expect at least one rate hike before the end of the year due to rising energy prices and consumer inflation concerns. The April FOMC minutes showed Fed officials were leaning towards maintaining high interest rates or even raising them if inflation remains above the 2% target. According to CME FedWatch, the probability of a 25-bps hike in December has reached over 60%, supporting Treasury yields and the dollar, thus weighing on gold.
On the geopolitical front, a senior Iranian source said no agreement has been reached with the US, although both sides are moving closer to a middle ground. Iranian uranium and control of the Strait of Hormuz remain crucial sticking points. US Secretary of State Marco Rubio stated that Iran's intention to impose tolls in the Strait of Hormuz is an obstacle to a deal, while President Trump reiterated that the US rejects tolls and is committed to taking back Iran's stockpile of high-enriched uranium.
These tensions keep geopolitical risk premiums high, supporting USD bulls and signaling that the most likely path for gold currently remains to the downside.
Variables to monitor: US-Iran negotiations, energy prices, Fed policy, and Treasury yield movements. (Arl)*
Source: Newsmaker.id
