Burdened by the Fed's Interest Rates, Gold Prices Suffer This Week
Jakarta, CNBC Indonesia — Global gold prices have trended downwards throughout this week, despite a turnaround in late trading, weighed down by the US Federal Reserve’s (the Fed) decision to again hold its benchmark interest rate steady.
According to Refinitiv, the gold price in the final trading of the week, Friday (1/5/2026), closed at US$4,613.02 per troy ounce. The price weakened by 0.17%. Over the past week, gold plunged 2.02% point-to-point.
The Fed did hold interest rates, but in its most divided decision since 1992.
The central bank highlighted growing concerns over inflation. Three officials even rejected the statement because they did not want any signal of a bias towards rate cuts.
After the Federal Reserve’s decision, market participants continue to bet that interest rates will not be cut this year or in the near future. Inflation concerns have risen again as global oil prices remain above US$100 per barrel due to US-backed conflicts against Iran.
“Only Donald Trump and Iran can save the market, but neither side is approaching an agreement and oil prices reflect that. In this situation, the outlook for gold does not look too bright,” said market analyst at City Index and FOREX.com, Fawad Razaqzada, quoted Saturday (2/5/2026).
Inflation concerns are rising along with global oil prices that remain above US$100 per barrel due to the US-backed conflict against Iran.
From a fundamental economic perspective, gold’s attractiveness is still limited by the prospects of tight central bank interest rate policies. US Personal Consumption Expenditures (PCE) data showed a 0.7% surge last month, recording the fastest growth since mid-2022.
This strengthens concerns that inflation will remain high amid uncertainty from the conflict in Iran, forcing the Fed and the Bank of England (BoE) to maintain interest rates at high levels or even tighten further if the situation worsens.
Although gold serves as a hedge instrument, rising interest rates tend to reduce investor interest because they increase the opportunity cost compared to interest-yielding assets.
Despite short-term selling pressure due to geopolitical uncertainty in the Middle East, analysts still see long-term recovery potential for gold as a safe-haven asset.
Citi’s projections show a fairly stable price target at US$4,300 in the short term, with potential to reach US$5,000 within the next 6 to 12 months as market confidence in safe-haven assets returns.
Overall, the current dynamics indicate that although gold has recorded a monthly decline of around 0.84%, price volatility remains high due to the tug-of-war between global inflation risks and geopolitical tensions.