Gold eyes second weekly loss, silver price drops further

Gold slipped below $5,100 an oz. 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 oz., before recovering some losses. Silver, meanwhile, was hit harder, down almost 5% and just holding the $80-an-ounce level.

“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.”

Inflation woes

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

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 U.S.-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.

Also fuelling the inflationary worries is the latest U.S. 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 U.S. consumer sentiment has now declined to a three-month low amid fears of high inflation or even stagflation.

Since setting a record close to $5,600 an oz. in late January, gold 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.