Gold (XAU/USD) sticks to modest intraday losses through the early European session on Friday, albeit it lacks follow-through selling and holds above the $4,500 psychological mark.
The US Dollar (USD) clings to its recent strong gains to a six-week peak, touched on Wednesday, amid the Federal Reserve’s (Fed) hawkish outlook
Apart from this, mixed signals over a potential US-Iran peace deal benefit the Greenback’s reserve currency status and turn out to be a key factor that undermines demand for the commodity. Market participants have completely priced out any possibility of a rate cut by the Fed for the remainder of 2026; instead, they are now betting on at least one rate hike before year-end amid rising energy prices and consumer inflation fears. Moreover, Minutes from the April 28–29 FOMC meeting released on Wednesday revealed officials leaning toward keeping rates elevated, or even raising them, if inflation continues to run persistently above the 2% target.
The CME Group’s FedWatch Tool indicates over a 60% chance that the US central bank will raise borrowing costs by 25 basis points (bps) at the December meeting. The outlook had been a key factor behind the recent surge in US Treasury bond yields, supporting the USD and weighing on the non-yielding Gold. Meanwhile, a senior Iranian source said that no deal has been reached with the US, but the gaps in positions between the two sides have narrowed.