Gold Price Ends Lower for Fourth Week Despite Rebound as Fed Rate Hike Bets Strengthen

Gold prices rebounded more than 1% on Friday but still finished the week in negative territory, as renewed expectations of Federal Reserve interest rate hikes and a stronger U.S. dollar continued to pressure the precious metal. While easing inflation concerns linked to falling oil prices helped gold recover from recent lows, the broader outlook remained weighed down by expectations that U.S. monetary policy could stay restrictive for longer.

Spot gold climbed 1.6% to close at $4,090.26 per ounce, while U.S. gold futures gained 1.4% to settle at $4,103.00 per ounce. Despite Friday’s rally, spot gold posted a 1.7% weekly loss, extending its losing streak to four consecutive weeks. Gold futures fell an even steeper 3.3% for the week.

Investor attention remained focused on the Federal Reserve after the release of the latest U.S. inflation data. The May core Personal Consumption Expenditures (PCE) Price Index, the Fed’s preferred inflation measure, increased in line with market expectations on both a monthly and annual basis. The annual core reading of 3.4% marked its highest level since October 2023, while headline PCE inflation also matched forecasts and reached its strongest yearly pace since April 2023.

Although inflation remained elevated, many traders viewed the May report as a possible peak, largely because crude oil prices have dropped sharply this week after geopolitical tensions in the Middle East eased. The decline in energy prices reduced fears of sustained inflation, prompting markets to slightly lower expectations for additional Fed rate hikes while increasing bets that policymakers could leave interest rates unchanged.

However, last week's hawkish Federal Reserve projections continued to influence investor sentiment. The latest Fed dot plot showed that at least half of Federal Open Market Committee members expect further rate hikes this year, citing inflation risks that had previously been fueled by higher oil prices. Higher interest rates typically reduce the appeal of non-yielding assets like gold while supporting the U.S. dollar, making bullion more expensive for international buyers.

David Morrison, senior market analyst at Trade Nation, noted that gold's rebound followed a sharp selloff that briefly pushed prices below $4,000, their lowest level since early November. He said the softer U.S. dollar after inflation data matched expectations helped gold regain support above the key psychological level. However, Morrison cautioned that the recovery may simply reflect a technical rebound rather than the beginning of a sustained uptrend.

Other precious metals also struggled throughout the week. Spot silver dropped roughly 9%, while platinum declined 2.3%, reflecting broader pressure across the metals market as investors reassessed interest rate expectations.

Meanwhile, geopolitical developments remained in focus. President Donald Trump accused Iran of violating the ceasefire agreement by launching at least four drones toward ships passing through the Strait of Hormuz, with one cargo vessel reportedly struck. While Trump did not identify the vessel, reports indicated it was likely the Singapore-flagged cargo ship Ever Lovely, which was allegedly targeted by Iran’s Islamic Revolutionary Guard Corps (IRGC).

Despite the reported attack, oil prices continued to fall as shipping activity through the Strait of Hormuz remained largely uninterrupted. The decline in crude prices helped ease inflation concerns, offering limited support to gold even as expectations of higher U.S. interest rates continued to dominate market sentiment.