Gold futures reversed earlier losses to close higher on Friday, buoyed by the latest U.S. economic data showing improved consumer confidence and easing near-term inflation expectations.
The preliminary reading for the University of Michigan's monthly consumer sentiment survey for July came in at 54.4, surpassing expectations and rising from the final June reading of 49.5 and the May final reading of 44.8.
The one-year inflation expectation for the month edged down to 4.2% from 4.6%, though this level remains above the 3.4% seen in February, before the onset of the U.S.-Iran conflict.
Since the war erupted in late February, gold prices have fallen approximately 25%, pressured by market expectations that war-induced inflation could lead to higher interest rates for a prolonged period.
While some weaker-than-expected U.S. inflation data released this week tempered bets that the Federal Reserve would tighten monetary policy, escalating hostilities between the U.S. and Iran have fueled investor concerns that higher energy prices could sustain elevated inflation and prompt the Fed to raise rates.
Analyst Soojin Kim at MUFG noted in a report, "Recent price action suggests the market is currently assigning greater weight to the prospect of 'higher-for-longer' U.S. rates than to gold's traditional safe-haven demand. This leaves gold looking vulnerable, unless geopolitical risks translate into a broader deterioration in financial market sentiment."
The front-month gold futures contract for July delivery on the COMEX rose 0.7% to settle at $4,012.70 per ounce. The front-month silver contract for July delivery gained 0.2% to settle at $56.038 per ounce.
For the week, gold and silver declined by 2.2% and 6.3%, respectively.
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