Gold traded with little net movement in Asian hours on Friday following two sessions of gains, yet the metal remained positioned to record a weekly decline as market participants weighed renewed geopolitical risk against signs of tighter U.S. monetary policy.
Spot gold was unchanged at $4,995.85 per ounce by 21:20 ET (02:20 GMT), while U.S. Gold Futures ticked up 0.4% to $5,015.0. On the week, the yellow metal was set to fall nearly 1%, even after a sharp mid-week advance driven by safe-haven buying.
Market action this week reflected a reversal in sentiment. Early in the week, risk appetite improved as optimism around U.S.-Iran diplomatic talks eased investor caution, producing a pullback in bullion. Later in the week, however, diplomatic tensions between Washington and Tehran re-emerged and supported demand for gold as a defensive asset.
Volumes were subdued through the session, in part because Chinese markets were closed for Lunar New Year holidays, leaving liquidity thin in key trading hubs.
Escalating diplomatic strains kept a floor under bullion prices. U.S. President Donald Trump warned Iran it must negotiate a nuclear deal or face unspecified consequences within about 10 to 15 days, a statement that underscored the prospect of military action that could disrupt Middle East oil flows and broader global markets.
That geopolitical backdrop, however, was counterbalanced by a firmer U.S. dollar and hawkish undertones from recent Federal Reserve minutes. These Fed signals tempered expectations for near-term rate cuts and weighed on gold, which typically underperforms when the dollar strengthens.
The U.S. Dollar Index was on track to rise by more than 1% for the week - its best weekly showing in months - a dynamic that typically pressures non-yielding assets such as gold.
Heading into the weekend, market focus shifted to the U.S. Personal Consumption Expenditures (PCE) Price Index, the Federal Reserve's preferred inflation gauge, with traders awaiting the data for further clues on the likely timing of policy moves.
Market context
- Geopolitical risk supported safe-haven flows into gold after diplomatic tensions resurfaced between the U.S. and Iran.
- Monetary policy signals from the Fed and a firmer dollar limited further gains for the metal.
- Thin trading volumes due to Chinese Lunar New Year closures contributed to muted price action.