prices fell sharply on Thursday and extended losses into Friday, pressured by a stronger US dollar, rising Treasury yields, and diminishing expectations of rate cuts following hotter-than-expected inflation data.
Spot gold settled near $4,650 per ounce on Thursday, down about 0.8 per cent on the day, and weakened further toward $4,610 on Friday — on track for a weekly loss of nearly 2 per cent. On MCX, gold traded around ₹1,61,978 per 10 gm, down 0.13 per cent, after opening with a gap-down and slipping below the ₹1,60,000 mark in early trade on Friday.
US April CPI accelerated to 3.8 per cent, the highest reading since May 2023, driven largely by energy costs linked to the Iran conflict and disruptions in the Strait of Hormuz. Benchmark 10-year US Treasury yields climbed close to one-year highs, raising the opportunity cost of holding non-yielding gold. The CME FedWatch tool showed rate cut expectations have largely evaporated following the week’s inflation reports.
A record rally in the S&P 500 further dampened safe-haven demand. Hawkish remarks from Kansas City Fed’s Jeffrey Schmid and Cleveland Fed’s Beth Hammack reinforced the view that rates could stay higher for longer.
On the geopolitical front, President Trump met Chinese President Xi Jinping in Beijing, with discussions covering trade, Iran, and the Strait of Hormuz situation. Xi warned that mishandling the Taiwan issue could severely damage bilateral relations.
Adding to the pressure on domestic prices, India raised gold and silver import duties to nearly 15 per cent from around 6 per cent and imposed a quantity restriction of 100 kg on gold imports, moves aimed at protecting forex reserves, but likely to weigh on jewellery demand in one of the world’s largest bullion-consuming nations.
Renisha Chainani, Head of Research at Augmont, noted that markets have fully unwound expectations of a Fed rate cut, with some positioning now reflecting the possibility of a rate hike by December. She added that the primary driver remains the ongoing Iran conflict and the sustained closure of the Strait of Hormuz, which has materially disrupted global energy supply chains. On India’s import policy, she pointed out that future advance authorisation issuances are now conditional on at least 50 per cent fulfilment of export obligations from prior authorisations. Technically, she said gold remains range-bound between $4,500 and $4,780 with no clear directional bias, recommending a “…buy-on-dips, sell-on-rallies approach,” while silver, having pulled back after testing resistance at $90, is expected to find firm support at $80.
Markets now await US industrial production data for further direction.