Gold nursed minor losses on Friday with price action contained within Thursday’s $4,100 trading range, set for 1.6% weekly depreciation.
Precious metals struggled this week as the resumption of hostilities in Iran boosted crude oil prices, pressuring central banks to hike interest rates.
Markets are looking for direction amid a tense calm, and rumours that mediators are working to bring Washington and Tehran back to the negotiating table. Axios cited sources as saying that the US is still committed to finding a resolution and that technical talks to reach a nuclear deal continue.
The DXY Dollar Index, which measures the value of the greenback against a basket of six peers, has bounced from levels near three-week highs amid a cautious market mood, and is drawing closer to the 101.00 level, which keeps gold upside attempts limited.
XAUUSD trades at $4,110, holding just below the trendline resistance from early March lows, although the higher low seen earlier this week suggests that bears might be losing momentum. Indicators in the daily chart are also showing a weakening bearish momentum, yet with no clear sign of a trend shift on the horizon so far.
XAGUSD turns upside down amid renewed MidEast hostilities
Silver surrendered its early gains and shed 0.73% to near $59.50 on Friday. The white metal turned negative amid fears that the next monetary policy move by the Federal Reserve will be on the upside.
According to the CME FedWatch tool, the probability of the Fed delivering at least one interest rate hike this year is almost 80%.
Higher interest rates by the Fed bode poorly for non-yielding assets, such as silver.
Hawkish Fed prospects remain firm amid fears of a prolonged US-Iran war, a scenario that will keep the energy supply disrupted. According to Iranian state media, US forces struck several more locations in coastal Iran.
The longer the aggression between the US and Iran continues, the more likely it is that oil prices will remain higher.
In the last few months, silver underperformed as higher crude oil prices de-anchored inflationary pressures worldwide.
Meanwhile, a sharp recovery in the dollar is also hurting the price of silver.
Going forward, investors await the US consumer price index (CPI) data for June, which will be released on Tuesday.
(Source: OANDA)
