Spot gold declined by 0.4 percent to $4,522.06 per ounce as of 0611 GMT, extending its weekly loss to about 0.3 percent. U.S. gold futures for June delivery also dropped 0.4 percent to settle at $4,522.30 per ounce.
The decline comes as the U.S. dollar hovered near a six-week high, making gold more expensive for investors holding other currencies and reducing global demand for bullion.
Analysts say the stronger dollar and expectations of prolonged high interest rates continue to pressure the gold market.
“What’s been driving gold lower has been the stronger dollar, which in turn is being elevated by ongoing high interest rates pretty much around the world,” said Edward Meir, an analyst at Marex.
Investor sentiment was also shaped by developments in the Middle East and uncertainty surrounding talks between the United States and Iran.
U.S. Secretary of State Marco Rubio said there had been “some good signs” in ongoing discussions with Iran. However, he noted that concerns over Tehran’s uranium stockpile and control of the Strait of Hormuz remain major sticking points in negotiations.
Despite the cautious optimism, oil prices continued to rise as investors remained doubtful about the chances of a major breakthrough in the talks. Higher crude oil prices have renewed fears of rising inflation globally.
Economists warn that persistent inflationary pressure could force central banks, especially the U.S. Federal Reserve, to keep interest rates elevated for a longer period or even implement additional rate hikes.
Although gold is traditionally viewed as a safe-haven asset and a hedge against inflation, higher interest rates often reduce its appeal because the metal does not yield interest.
Market expectations for another Federal Reserve rate increase before the end of the year have also strengthened. According to CME Group’s FedWatch Tool, traders are currently pricing in a 60 percent probability of a rate hike by December.
Adding to market attention, U.S. President Donald Trump is expected to swear in Kevin Warsh as the new Federal Reserve Chair on Friday at the White House, according to officials within the administration.
Meanwhile, Richmond Federal Reserve President Thomas Barkin said on Thursday that the Fed’s next policy direction would depend largely on how businesses and consumers respond to ongoing economic pressures.
He stated that policymakers are assessing whether the central bank can “look through” current inflation levels or whether additional tightening measures may be necessary.
Other precious metals also traded lower during the session. Spot silver dipped 0.6 percent to $76.25 per ounce, although it remained on track for a modest weekly gain of 0.4 percent.
Platinum fell 0.8 percent to $1,949.43, while palladium lost 0.4 percent to trade at $1,373.30 per ounce. Both metals were headed for weekly losses amid broader market caution.