Gold prices rise but head for second weekly loss as Iran war spurs inflation fears

Investing.com-- Gold prices rose in Asian trade on Friday but were still headed for a second straight week of losses amid growing concerns over energy-fueled inflation from the U.S.-Israel war on Iran. 

Bullion saw some relief on Friday as the dollar and oil stalled their advance, especially after the U.S. announced more waivers of Russian crude to offset supply shocks from Iran.

Spot gold rose 0.6% to $5,109.46/oz by 01:14 ET (05:14 GMT), while gold futures fell 0.3% to $5,111.84/oz. 

Gold heads for second week of losses, remains rangebound

Spot gold was set to lose about 1.2% this week, its second straight week of losses. 

While the yellow metal did see some safe haven demand due to worsening geopolitical conditions in the Middle East, its gains were largely offset by growing concerns over sticky inflation.

Markets feared that the Iran war will keep oil prices elevated for a prolonged period, driving up inflation across the globe and eliciting a more hawkish stance from major central banks. 

This notion saw markets steadily pricing out expectations for any near-term interest rate cuts by the Federal Reserve, with the central bank widely expected to leave rates unchanged when it meets next week. 

Gold was left trading squarely in a $5,000-$5,200/oz range since the onset of the Iran war. While the yellow metal was still trading up for the year, it now appeared to be struggling to make headway after plummeting from a near $5,600/oz record high in late-January. 

ANZ analysts said in a note that while gold had lagged amid a storm of near-term headwinds, the yellow metal still remained “a key portfolio diversifier, providing protection against a broad range of macro and geopolitical uncertainties.” 

Other precious metals rose on Friday and were nursing a muted performance for the week. Spot silver rose 0.7% to $84.3275/oz, while spot platinum rose 0.5% to $2,143.21/oz. 

PCE inflation data awaited for more cues 

Markets were now awaiting U.S. PCE price index data for more cues on the world’s largest economy. 

The print is the Fed’s preferred inflation gauge, and is likely to factor into interest rate expectations. 

Still, the PCE data is for January, and is unlikely to reflect any energy-driven increases in inflation. 

The PCE data comes just days before a Fed meeting, with the central bank widely expected to leave rates unchanged next week. CME Fedwatch showed markets expect rates to remain unchanged until at least September.