Gold drops below $4,700 on stronger US Dollar, Middle East tensions

• Gold price tumbles to near $4,690 in Friday’s early European session. 

• A firming US dollar and intensifying tensions in the Middle East exert some pressure on the Gold price. 

• Higher demand from major central banks could support the yellow metal. 

Gold price (XAU/USD) falls to around $4,690 during the early Asian session on Friday. The precious metal attracts some sellers amid a stronger US Dollar (USD) and elevated oil prices that stoked inflation worries. 

The US military said it intercepted two Iranian oil supertankers that tried to evade its blockade as Washington continues to stymie Iran’s shipping and Tehran threatens vessels in the Strait of Hormuz, Bloomberg reported on Thursday. Later in the day, US President Donald Trump said that if Iran doesn’t move the oil, its infrastructure will explode. Iranian officials did not say they had agreed to any extension of ‌the truce, accusing Washington of violating it by maintaining a ‌blockade on Iranian trade by sea.

“Gold continues to take its cues ‌from the oil market, with rising energy costs keeping the risk of near-term dollar strength and elevated inflation in focus,” said Ole Hansen, head of commodity strategy at Saxo Bank.

Oil prices surged this week, reflecting worries over ongoing supply disruptions. Higher crude oil prices can add to inflationary pressures, raising the bar for cutting rates. Gold is often used amid geopolitical uncertainty but does not yield interest, making it less attractive when interest rates are high.

However, demand from major central banks could underpin the yellow metal. Central banks in emerging markets, led by China, Poland, India, and Turkey, continue to aggressively diversify their foreign exchange reserves away from the USD by accumulating gold in 2025 and early 2026. The People's Bank of China (PBoC) added 5 tonnes in March, extending its monthly buying streak to 17 consecutive months.