Persistent US inflation data has heightened market concerns over prolonged high interest rates, putting pressure on gold prices and setting the stage for a potential weekly loss.
During Friday's European session, gold fell more than 2%, dropping near $4,560 per ounce, while silver declined over 6% to around $78.
The latest US data revealed that wholesale inflation (PPI) accelerated further in April, reaching its fastest pace since 2022. Concurrently, the Consumer Price Index (CPI) also recorded its largest increase since 2023.
Against this backdrop of rising inflationary pressures, market expectations for sustained high US interest rates have strengthened. The continued strength of the US dollar and a significant concurrent rise in the yield on the 10-year US Treasury note have exerted notable downward pressure on gold.
The crisis in the Strait of Hormuz continues to impact markets. This critical global energy transit chokepoint remains effectively blockaded. With diplomatic efforts to end the US-Iran conflict stalling, ongoing energy supply risks are fueling market anxieties about inflation.
International oil prices have generally maintained an upward trend this week, with WTI crude surging past $103 on Friday.
Analysts Daniel Hynes and Soni Kumari from ANZ Group stated in a report, "Rising inflation expectations, climbing yields, and a stronger dollar are likely to keep gold under pressure in the near term."
ANZ also postponed its forecast for gold reaching a target of $6,000 per ounce from early next year to mid-2027.
Tim Waterer, Chief Market Analyst at KCM Trade, noted that gold is currently facing headwinds from multiple fronts. He said, "Gold is getting hit from all sides—rising oil prices are putting inflation back in focus, pushing yields higher, and a stronger dollar is making gold the unfortunate victim of renewed market skepticism about rate cuts."
Is There Still Support for Gold's Outlook? Following a significant drop at the onset of the conflict, gold has largely been trading within a narrow range. The market is weighing the risks of high interest rates against concerns of slowing economic growth.
On one hand, persistent high inflation may compel interest rates to remain elevated for an extended period. On the other hand, a prolonged conflict could drag on economic growth, potentially prompting a renewed shift towards accommodative monetary policy. Since the conflict began, gold has accumulated a decline of over 12%.
However, some institutions believe gold could still regain investor support in the future.
Ryan McKay, Senior Commodity Strategist at TD Securities, indicated in a report that despite recent weakness, hedge funds may continue to increase their allocations to gold in the coming days.
Discussing Commodity Trading Advisors (CTAs), McKay stated, "Under nearly all simulated price paths, our pricing models consistently point towards CTAs adding to their long positions."
Silver plunged 6% on Friday. However, driven by renewed speculative enthusiasm for industrial metals, silver prices have risen 6% in May.
The recent sustained decline in the gold-silver ratio is viewed by some traders as a signal that silver is relatively undervalued. Nevertheless, ANZ analysts noted in their report that silver's recent rally may lack sufficient support in the short term.
They added, "However, persistent market deficits and structural demand should provide solid support for silver prices in the medium to long term."
Meanwhile, following a recent increase in gold import duties, India has further tightened gold import regulations to stabilize the rupee exchange rate. These measures are putting pressure on gold demand sentiment in India, the world's second-largest gold consumer market.
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