Gold prices slipped on Friday and were poised for a weekly loss as intensifying military conflict between the United States and Iran stoked inflation fears and solidified expectations that the Federal Reserve will maintain a hawkish monetary stance.
Spot gold declined 0.1% to $4,115.79 per ounce by 0601 GMT, heading for a 1.4% weekly drop. US gold futures for August delivery fell 0.4% to $4,124.90 per ounce.
Geopolitical Tensions Lift Oil, Inflation Concerns
The precious metal's decline came as oil prices remained on track for a weekly gain following continued military exchanges between the US and Iran. Iranian forces launched attacks on US military infrastructure in Gulf states on Thursday, retaliating against earlier US strikes on Iran's southern coastal and eastern provinces.
The escalation has heightened worries that rising energy costs will add to inflationary pressures. As a result, investors have increasingly priced in the possibility that the Fed may need to keep interest rates elevated or even raise them further this year. According to CME's FedWatch tool, markets now see a 63% probability of a September rate hike, up from approximately 54% a week earlier.
Higher interest rates typically reduce the appeal of non-yielding assets like gold. Although the metal is often viewed as an inflation hedge, rising rates increase the opportunity cost of holding bullion since it generates no interest income. This shift in the rate outlook has weighed on investor sentiment toward gold despite ongoing geopolitical uncertainty.
HSBC Lowers Long-Term Gold Forecasts
Adding to the headwinds, HSBC lowered its average gold price forecasts for 2026 and 2027 on Thursday. The bank cited a more hawkish outlook for US monetary policy and a stronger US dollar as key reasons for the revision. A stronger dollar makes gold more expensive for holders of other currencies, potentially dampening demand and adding further pressure on prices.
Other Precious Metals Mixed but Weekly Losers
Among other precious metals, silver traded little changed near $60 per ounce on Friday but remained on track for a weekly decline. Platinum climbed 1.4% to $1,632.99 per ounce, and palladium advanced 1.9% to $1,270.54 per ounce. Despite Friday's gains, all three metals were set to end the week lower, reflecting broader investor caution amid shifting monetary policy expectations and heightened geopolitical uncertainty.
Gold continues to face competing forces. While geopolitical tensions traditionally support safe-haven demand, growing expectations of tighter monetary policy and higher interest rates have outweighed that support, leaving the precious metal on course for its first weekly decline in recent sessions.
For more context on how oil-driven inflation fears are affecting markets, see Gold Slips as Iran Oil Spike Fuels Fed Rate Fears, Overwhelming Haven Appeal and Dow Plunges 509 Points as Trump's Iran Remarks Trigger Oil Surge, Inflation Fears.
This article is for informational purposes only and does not constitute financial advice.
