By: Economy Middle East

Gold prices remained under pressure at the end of the week as investors responded to a stronger U.S. dollar and growing expectations that the Federal Reserve will keep interest rates elevated. The combination of tighter monetary policy expectations and reduced demand for safe-haven assets pushed bullion lower, while precious metals broadly headed toward weekly losses.

Gold prices were on track for a third consecutive weekly decline after falling more than 1 percent on Friday. By 8:48 UAE time, spot gold had dropped 2.17 percent to $4,134.60 per ounce, while U.S. gold futures for August delivery declined 2.18 percent to $4,153.47.

In the UAE, local gold rates mirrored the global trend, with 24-carat gold falling AED7.25 to AED502.00 per gram and 22-carat gold declining AED6.75 to AED464.75. Meanwhile, 21-carat and 18-carat gold lost AED5.50 to trade at AED445.75 and AED382.00 respectively, while 14-carat gold slipped AED4.25 to AED298.00 per gram. Trading activity was also lighter than usual as financial markets in mainland China and Hong Kong remained closed for the Dragon Boat Festival holiday.

Market pressure

The U.S. dollar climbed to a one-year high, making dollar-denominated gold more expensive for holders of other currencies. At the same time, nine of the Federal Reserve‘s 19 policymakers indicated they expect at least one interest rate increase before the end of the year. That outlook aligns with several major central banks that have either raised borrowing costs or signalled further tightening to address inflationary pressures linked to the Iran war. 

According to the CME FedWatch Tool, traders now see an 87 percent probability of a U.S. rate hike in December, up from 61 percent before the Federal Reserve’s latest decision. As gold does not generate interest income, higher rates typically reduce its appeal. Goldman Sachs also lowered its year-end gold price forecast to $4,900 per ounce from $5,400, saying it no longer expects a Federal Reserve rate cut this year. Meanwhile, U.S. Vice President JD Vance withdrew from a planned meeting with Iranian negotiators in Switzerland, adding another layer of geopolitical uncertainty. Other precious metals also declined, with spot silver falling 3.75 percent, platinum losing 2.46 percent and palladium dropping 2.13 percent, leaving all three on track for weekly losses.