(Kitco NewsWire) - Spot gold and silver prices were lower in late U.S. trading Friday, extending a week of heavy selling as renewed concerns about military escalation involving Iran pushed crude oil prices to multiyear highs and reinforced expectations for restrictive Federal Reserve monetary policy. Strong U.S. business activity and rising consumer inflation expectations added to the pressure on precious metals, while losses across North American and European equity markets underscored broader investor caution. At the time of the latest available late-afternoon price reading, spot gold was trading near $3,995.81 an ounce, down 0.70%, while spot silver was near $53.896, down 1.26%. Gold was heading toward a weekly decline exceeding 3.5%, with both metals remaining under significant selling pressure.
Friday's U.S. economic reports reinforced the view that the economy remains resilient despite elevated borrowing costs, while inflation pressure continues to intensify. The preliminary October composite purchasing managers' index eased to 57.6 from 58.4 in September, but remained at its second-highest level since March 2022. The manufacturing PMI increased to 56.0 from 55.9, beating expectations of 55.5, while the services PMI declined to 57.9 from 58.8, slightly below expectations of 58.0. New orders continued to expand strongly, while selling-price inflation across manufacturing and services accelerated to its fastest pace since August 2022. The combination of firm business activity and rising output prices strengthened concerns that persistent inflation could require additional monetary tightening.
The final October University of Michigan consumer sentiment index was revised higher to 48.0 from the preliminary reading of 46.3, but remained slightly below September's 48.1 and approximately 10% lower than a year earlier. The current economic conditions index declined to 46.7 from 50.9 in September, reflecting continuing pressure on household purchasing power. More importantly for interest rate markets, year-ahead inflation expectations increased to 4.7% from 4.6%, while longer-term inflation expectations rose to 3.5% from 3.4%. Both measures reached their highest readings since May, reinforcing concerns that elevated energy prices and persistent consumer cost pressures are becoming more deeply embedded in inflation expectations.
The Federal Reserve remains in its premeeting communications blackout, leaving next week's policy decision and inflation reports as the principal catalysts for interest rate expectations. The Federal Open Market Committee meets Oct. 27-28, with its decision scheduled for 2 p.m. EDT Wednesday. September personal consumption expenditures inflation data are due Thursday, Oct. 29, at 8:30 a.m. EDT. Traders will assess whether the stronger business activity and rising consumer inflation expectations evident in Friday's reports are also reflected in the Fed's preferred inflation measure. Softer inflation readings could reduce December rate hike expectations and provide support for gold through lower Treasury yields and a weaker dollar, while persistent price pressure would strengthen the case for additional monetary tightening and maintain pressure on bullion.
The Strait of Hormuz and U.S.-Iran situation remained a significant source of uncertainty Friday as fresh concerns about possible renewed U.S. and Israeli military action against Iran pushed crude oil prices sharply higher. Reports that Washington and Israel could consider additional strikes after the Nov. 3 U.S. midterm elections intensified fears of a broader regional confrontation, although no new military operation has been confirmed. Tehran has warned of retaliation against regional oil facilities and other infrastructure if attacks resume, while its Revolutionary Guard has continued targeting commercial shipping through the Strait of Hormuz. October has become the most intense month for attacks on vessels in and around the waterway since the conflict began, with 28 confirmed and reported incidents recorded during the month and 113 since late February. More than 30 very large crude carriers have sustained damage during the conflict, including 11 in October. Diplomatic efforts remain stalled, leaving commercial shipping exposed to continued security threats, elevated insurance costs and possible additional supply disruptions.
The threat to Gulf energy supplies pushed Brent crude above $117.00 a barrel during Friday's session, its highest level in more than four years, while WTI climbed above $103.00. Although alternative export routes and expanded pipeline shipments have helped restore regional petroleum exports, persistent attacks on vessels and infrastructure continue to sustain a substantial geopolitical premium. For gold, escalating military risks would ordinarily support defensive demand, but higher oil prices also reinforce inflation expectations and the possibility of additional Fed tightening. This competing influence has limited bullion's safe-haven response despite weakening equity markets. Silver remains under greater pressure as restrictive monetary policy expectations and concerns about the impact of elevated energy costs on manufacturing demand compound the broader precious metals decline.
North American equity markets finished lower Friday as rising oil prices, renewed geopolitical concerns and uncertainty surrounding technology-sector investment weighed on investor sentiment. The Dow Jones Industrial Average declined 652.82 points, or approximately 1.24%, to close at 52,215.16, while the S&P 500 lost 39.75 points, or 0.52%, to finish at 7,623.68. The Nasdaq Composite slipped 53.52 points, or 0.21%, to 25,955.34, after surrendering an earlier advance, while the Russell 2000 declined 8.13 points, or 0.29%, to 2,775.90. The losses followed Thursday's sharp technology-led selloff, although the Nasdaq's smaller Friday decline suggested some stabilization in major growth shares. Canada's S&P/TSX Composite Index also finished approximately 0.34% lower, with weakness in financial and precious metals mining shares partly offset by gains in energy producers as crude prices climbed. For the week, the S&P 500 lost approximately 0.5% and the Nasdaq declined 0.7%, while the Dow gained 0.4%.
European equity markets also closed lower Friday, completing another difficult week as rising oil prices, concerns about artificial intelligence financing and continuing political and fiscal uncertainty in France weighed on sentiment. The pan-European Stoxx 600 declined approximately 0.3% to 635.77, bringing its weekly loss to around 1.4%. Germany's DAX fell approximately 0.8%, while France's CAC 40 slipped about 0.4% to 7,782.82. The U.K.'s FTSE 100 declined approximately 0.3% to 10,690.36. Energy shares outperformed as crude prices surged, while economically sensitive industries and companies facing higher financing costs remained under pressure. France continued to face heightened political tensions and concerns about public finances, contributing to volatility in European government bond markets. The decline in regional equities reflected the combined impact of elevated energy costs, weaker corporate sentiment and uncertainty about the outlook for interest rates.
The key outside markets see Nymex WTI crude oil prices sharply higher and trading near $103.07 a barrel in late-session readings, while Brent crude was near $117.23. The yield on the benchmark 10-year U.S. Treasury note was trading near the 5.0% area. The U.S. dollar remained comparatively firm. (Kitco Global Index shows how much of today's gold move is the dollar versus the gold market itself.)
Technically, spot gold bulls' next upside price objective is to push prices back above the $4,075.00 resistance area, with a sustained recovery needed to ease the near-term bearish trend. Bears' next near-term downside price objective is a break below the $3,963.00 to $3,946.00 support zone, with a deeper downside target at $3,890.00. First resistance is seen at $4,075.00. First support is seen at $3,963.00 and then at $3,946.00.
Spot silver bulls' next upside price objective is to drive prices back above the $54.530 to $55.770 resistance zone, with a sustained move targeting $58.090. The next downside price objective for the bears is a break below $53.460, with deeper downside targets at $52.410 and then $51.390. First resistance is seen at $54.530 and then at $55.770. Next support is seen at $53.460 and then at $52.410.
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