Gold was on course for a weekly decline on Friday as higher U.S. Treasury yields and expectations for additional Federal Reserve rate increases continued to weigh on the non-yielding metal. The move capped another volatile week in which inflation, energy prices and monetary policy remained the dominant drivers.
Reuters reported spot gold around $4,274.94 an ounce late in the U.S. morning session, leaving the metal down about 2.4% for the week. U.S. gold futures were modestly higher on the day, but the broader weekly direction remained negative as bond yields stayed elevated.
The rate backdrop is important for XAU/USD because rising Treasury yields increase the opportunity cost of holding gold, which does not pay interest. Reuters also reported that traders were assigning a 64% probability to an October Fed hike and a 93% probability to a December hike, reflecting a sharp repricing of the U.S. policy path.
The stronger dollar has added another headwind. A firmer U.S. currency raises the cost of dollar-denominated bullion for many non-U.S. buyers, while the combination of high real yields and hawkish Fed expectations has reduced the relative appeal of defensive precious-metal exposure.
A weekly market recap from BabyPips similarly highlighted the bond market as the dominant force of the week, with surging Treasury yields supporting the dollar and weighing on gold. That leaves XAU/USD closely tied to incoming inflation data, Fed communication and any renewed changes in the Middle East risk premium.