Gold fell toward $4,100 an ounce on Friday, capping a weekly decline as a surge in energy prices linked to geopolitical tensions between the U.S. and Iran rekindled inflation fears, reinforcing expectations that the Federal Reserve will maintain a hawkish monetary stance.
Spot gold slid 0.4% to $4,103.23 per ounce in afternoon trading in New York, extending its loss for the week to 1.7%. U.S. gold futures for August delivery settled 0.7% lower at $4,113.70 per ounce.
The pullback in precious metals underscores how a fresh wave of military strikes between Washington and Tehran has disrupted global energy markets, propelling crude oil prices higher and threatening to unwind earlier projections of a global oil surplus. The rally in energy costs has heightened concern that inflation will remain sticky, forcing major central banks to keep interest rates elevated for longer.
While bullion traditionally functions as a hedge against rising consumer prices, higher interest rates erode the appeal of non-yielding assets relative to yield-bearing investments such as U.S. Treasuries.
“The major factor here is the restarting of tensions between the U.S. and Iran, with investors broadly not wanting to hold on to gold and silver at this point, which is why we’ve seen this move towards $4,100,” said Bart Melek, global head of commodity strategy at TD Securities. “Every indication points toward the market worrying about inflation, particularly since oil has rebounded in the last few days. This will keep central banks diligent, particularly the Federal Reserve.”
Market pricing currently reflects a nearly 69% probability of a rate increase at the Fed’s September meeting, according to the CME FedWatch Tool. Hawkish divisions among policymakers were further highlighted in the minutes of the Fed’s June meeting, which revealed growing anxiety over persistent price pressures. Investors are now turning their attention to upcoming inflation data and congressional testimony from Fed Chair Kevin Warsh for clearer guidance on the path of monetary policy.
In physical markets, Indian gold traded at a steep discount during the week, while buying in China remained steady after the People’s Bank of China recorded its largest monthly addition to official gold reserves in over two and a half years in June.
In other precious metals, spot silver slipped 0.7% to $59.56 per ounce, while platinum added 0.4% to $1,616.72 and palladium advanced 2.2% to $1,274.50.
