(Bloomberg) — Gold headed for a weekly drop as a slight easing of geopolitical tensions in the Middle East sapped haven demand and a Federal Reserve inflation warning raised the prospect of fewer rate cuts.
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Bullion traded around $3,370 an ounce Friday, on pace for a 1.8% weekly decline. US President Donald Trump signaled he would give diplomacy a chance before deciding whether to strike Iran, dialing back on recent comments that suggested military action could be imminent. The shift in tone reduced fears of imminent action that could escalate hostilities, threaten energy flows and spur inflation.
“The biggest part of gold being down today is the deescalation in the Middle East,” Dan Pavilonis, senior market strategist at RJO Futures. “Everything is kind of on a pause with Iran, Israel and the US going into the weekend.”
The precious metal is still up more than 28% this year, and is trading not far below its record of $3,500.10 an ounce set in April. Wall Street banks have diverged over whether gold can continue its record-setting rally. Goldman Sachs Group Inc. reaffirmed a $4,000-an-ounce forecast by next year, while Citigroup Inc. said it saw prices dipping below $3,000 in 2026.
Signals from the Federal Reserve are also weighing on bullion. Fed Chairman Jerome Powell flagged inflation risks earlier this week due to impacts of Trump’s tariff agenda. That could make it tougher for the central bank to lower borrowing costs, which would be negative for non-yielding gold, which performs better in a lower-rate environment.
Spot gold was little changed at $3,369.54 an ounce at 12:14 p.m. in New York. Silver and platinum fell, while palladium rose.
–With assistance from William Clowes.
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