Gold’s week was shaped by two opposing forces. Closes in our data show the front-month future falling 1.7% on Wednesday to $4,107.90, rebounding 1.5% on Thursday to $4,170.10 and adding 0.4% on Friday to $4,186.70.
Investing.com’s commentary described a selloff in gold after the US inflation data as more of a fear about interest rates than a break in the trend. At the same time Investing.com reported that Treasury yields continued to fall even after hot inflation reports, which is normally supportive for gold.
Why hot inflation can hurt gold in the short run
Gold pays no interest. If inflation is higher than expected, investors may expect the Federal Reserve to keep rates higher for longer, which raises the opportunity cost of holding gold and can strengthen the dollar. That can outweigh gold’s reputation as an inflation hedge for a few sessions.
On Thursday the picture reversed. Mining.com said gold rallied as lower yields and a selloff in AI-related stocks drove haven demand. By Friday Investing.com reported that gold was set to slip for the week as the oil price gains offset the support from a weaker dollar and a bond rally.
The lesson is that gold is reacting to several drivers at once: real yields, the dollar, equities and oil. No single one explains the week. This is analysis of price behaviour and not investment advice.