Gold price eyes second straight weekly loss, silver price drops further

Gold slipped below $5,100 an ounce on Friday, heading towards a second consecutive weekly drop, as high energy prices stemming from the Middle East war continue to drive high-interest expectations.

Spot gold fell as much as 1% to about $5,020 an ounce, before recovering some losses. Silver, meanwhile, was hit harder, down almost 5% and just holding the $80-an-ounce level.

Bullion has traded sideways in recent sessions as the war in the Middle East continues with no end in sight. An initial spike earlier this month after the US-Israeli strike on Iran was succeeded by a bigger drop, and the metal has since traded mostly within a tight range between $5,000 and $5,200 an ounce.

Inflationary concerns from the ongoing war has kept gold in check during this period, as investors see the chances of the Federal Reserve and other global central banks cutting interest rates dwindle. A lower rate would bode well for bullion, as it yields no interest.

Increased inflation risks

“The gold price continues to fail to benefit from the geopolitical crisis,” Barbara Lambrecht, commodity analyst at Commerzbank Research, said in a note on Friday. “After all, with oil and gas prices rising significantly again this week, the risks of inflation are also increasing. This could force central banks to take countermeasures.”

Also fueling the inflationary worries is the latest US economic data, which showed consumer spending barely rose in the month of January, indicating that price pressures were building even before the attacks on Iran.

Two weeks into the war, the US consumer sentiment has now declined to a three-month low amid fears of high inflation or even stagflation.

With Friday’s moves, gold is now tracking towards a second down week in a row. Since setting a record close to $5,600 an ounce late January, the metal has since dropped nearly 9%, but remains up by 17% on the year. Silver, while is up for the week, is trailing gold with a 10% year-to-date gain.