Gold heads for second weekly loss on rate rise expectations

Spot gold was up 0.3% at $4,227.17 per ounce as of 2:15 p.m. ET (1815 GMT), and was down 2.3% for the week.

U.S. gold futures rose 3% to settle at $4,238.80.

“I think that the inflation ‌is going to ⁠linger ⁠for some time, even if oil prices do come down… we’ve heard this story before and there’s some degree of scepticism,” said Peter Grant, vice president and senior metals strategist at Zaner Metals.

Oil prices fell over 3% after the news that a memorandum between the United States and Iran to halt the war in the Gulf could be signed as soon as Sunday, a Western source told Reuters on Friday. Iran’s ⁠Fars news ‌agency, however, denied that speculation, citing a source close to the negotiations. [O/R]

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Gold has been under pressure since the conflict began at the end of ⁠February, on concerns that oil-driven inflation means central banks will keep interest rates elevated.

While investors regard gold as an inflation hedge, higher rates tend to weigh on the non-yielding metal. Traders are pricing in a 57% chance of a U.S. rate hike by December, according to the CME FedWatch tool.

Data this week showed U.S. producer prices increased more than expected in May, while consumer inflation jumped above 4%.

Attention is also turning to the Federal Reserve’s June 16-17 ‌policy meeting, the first to be chaired by Kevin Warsh, when the market expects the bank to hold rates steady.

UBS has lowered its gold outlook, warning that delayed Fed rate ⁠cuts will pressure prices toward the $3,850-4,000/oz range in the near term.

Elsewhere, Rolex raised the global price of its gold watches by an average 5% this month, marking a rare second annual increase for its main markets including Britain, Hong Kong and the U.S., according to two luxury research platforms and two dealers.

Spot silver rose 1.2% to $68.14 per ounce and palladium added 0.7% to $1,281.04, with both metals headed for weekly gains. Platinum fell 0.8% to $1,706.90 and was headed for a weekly loss.