By Barani Krishnan

Investing.com – Gold prices plunged on Friday after a spike in U.S. Treasury yields. But, gold still managed to gain more than 1% per week on the back geopolitical tensions fueled by the conflict in Ukraine and inflation fears that have Americans even more concerned than in the 1980s or 2008 recessions.

The most-active gold futures contract on New York’s Comex, , settled the day’s trade down $8, or 0.4%, at $1,954.20 an ounce. The benchmark gold futures contract saw an increase of $24.90 or 1.3% over the course of the week.

Friday’s slide in gold came as the 10-year U.S. Treasury note rose by 4.8%, adding to Thursday’s 3.5% gain and pressuring bullion which is non-yielding. After a tumble last week on the Fed’s modest first pandemic-era rate hike of 25 basis points, yields have started climbing again as central bank officials suggest more aggressive hikes of 50 basis points in the future to contain inflation at 40-year highs.

A climate of economic uncertainty and heightened political risk is a favorable environment for gold. This was the case with war in Ukraine, which has fueled both price pressures and increased political anxiety in America.

Craig Erlam, analyst at online trading platform OANDA, posited that gold will likely continue being “well supported against the backdrop of sky-high inflation and immense uncertainty.”

“That doesn’t necessarily mean we’re heading for record highs, which we currently sit a little more than 5% below,” Erlam said, referring to Comex’s all-time highs of $2,121 for gold. “But, as is the case more broadly right now, the main catalyst continues to be the constant flow of headlines which will continue to determine the path of travel for the yellow metal.”

The U.S. Gross Domestic Product, also known as, increased by 5.7% in the last year. This was its highest growth rate since 1984. Inflation, measured as the CPI (or ), grew even faster, rising by 7% in 2021. It was its fastest rate since 1981.

Since 2022 the CPI continued its rapid growth, with a 7.9% year-on-year increase in February. This compares to a 2.8% GDP forecast by the Federal Reserve for the entire year. The central bank’s tolerance for inflation is a mere 2% per year and it vowed to slow price pressures with a series of rate hikes through next year.

According to the University of Michigan’s Consumer Sentiment Survey, Americans worry more about inflation than during the two worst US recessions of 2008 and 1980, which was closely followed by the University of Michigan on Friday.

“With an expected year-ahead inflation rate at 5.4%, the highest since November 1981, inflation was mentioned throughout the survey, whether the questions referred to personal finances, prospects for the economy, or assessments of buying conditions,” Richard Curtin, chief economist for UMich’s Surveys of Consumers, said in a statement.

Umich’s Consumer Sentiment Index, updated every two weeks, remained at August 2011 lows, while people’s worries about inflation appeared to grow more dire in a nation where consumer spending makes up 70% of the economy, Curtin said.

“When asked to explain changes in their finances in their own words, more consumers mentioned reduced living standards due to rising inflation than any other time except during the two worst recessions in the past fifty years: from March 1979 to April 1981, and from May to October 2008,” Curtin added.