Gold prices maintained their weak momentum entering the third week around the $5,000 level despite a change in geopolitical sentiment that should have driven the price surge, but investors will pay close attention to important data towards the end of the week.
At 8.30 am, gold prices were at $4,966, down 0.20% since it opened in early trading on Thursday in the Asian session.
The latest statement from Washington has revived geopolitical tensions that have the potential to move global markets.
US Vice President JD Vance said Iran has still failed to meet the main demands of the United States in the current negotiations. Following this, Washington agreed to give Tehran two weeks to close the gap before any further decisions are taken.
At the same time, US President Donald Trump stressed that the use of force is not something that can be ruled out if diplomacy fails to stop Iran's nuclear program. This more assertive tone increases geopolitical risks, thus supporting demand for safe assets such as gold.
In a market that is still thin due to public holidays in several major regions, price movements are seen as more sensitive to headlines. Analysts at BMO Capital Markets expect gold prices to experience short-term pressure during the period of low liquidity.
However, any decline could open up buying space at cheaper prices if geopolitical risks continue to increase.
At the same time, the strengthening of the US Dollar has the potential to limit the rise in commodity prices traded in USD.
The minutes of the January meeting of the Federal Open Market Committee showed a mixed tone among policymakers. Some members saw the possibility of a rate hike if inflation remains stubborn.
Market expectations for a rate cut this year were also revised. Although traders reduced their expectations of monetary policy easing, Fed funds futures contracts still hint that a rate cut could occur as early as June.
Overall, the direction of gold is currently influenced by two main factors: geopolitical risks that support prices and the strength of the dollar, and interest rate expectations that have the potential to curb the rise.
The market remains sensitive to any new developments from Washington and Tehran.
