Gold is heading for its first weekly gain in three weeks as escalating Middle East tensions offset growing bets that the Federal Reserve will keep interest rates elevated. Prices eased on Friday but held above key technical support, leaving traders focused on next week’s Fed decision.
Gold edged lower on Friday yet stayed on course to snap a two-week losing streak, as conflict in the Middle East supported bullion despite expectations that the Federal Reserve could hold rates higher for longer. XAU/USD fell 0.2% to $4,042.72 an ounce, while gold futures were little changed at $4,044.92.
The metal has added 0.8% over the week, its first weekly advance in three, after falling nearly 2% in the previous session. Silver slipped alongside it, with XAG/USD down 0.3% to $57.47 an ounce.
Middle East conflict lifts safe-haven demand
Hostilities intensified after Iran-aligned Houthis attacked two Saudi oil tankers in the Red Sea, prompting President Donald Trump to warn that Washington would hold Iran responsible for any future Houthi attacks on commercial shipping and to threaten further military action against Tehran. The backdrop stayed tense after The New York Times reported that Iran had rejected a U.S.-backed ceasefire proposal, dimming hopes for near-term de-escalation.
That escalation helped lift oil prices and fed inflation concerns. Stronger-than-expected labor data added to worries that the Fed could keep policy restrictive, as initial jobless claims unexpectedly fell to 187,000, their lowest in decades, pushing the 10-year Treasury yield to its highest since January 2025.
Traders brace for the Fed decision
Because higher energy prices reinforce inflation risks, markets continue to price roughly a 34% probability of a quarter-point rate increase at next week’s meeting. Nomura analysts, however, expect the Fed to leave rates unchanged, with Chair Kevin Warsh unlikely to offer meaningful forward guidance given the absence of updated projections or a dot plot at the July meeting.
IG sees the recovery intact
Tony Sycamore, senior market analyst at IG, said gold’s latest decline reflected higher Treasury yields, a firmer dollar and weaker risk sentiment following the Middle East escalation. The US Dollar Index was little changed after easing from the prior session’s gains, offering only limited support as yields stayed the dominant headwind.
Yet Sycamore said the pullback had not materially altered gold’s broader outlook, with bullion still forming a base above the late-June low of $3,942. A sustained move above the early-July high of $4,202 would strengthen the bullish case and pave the way toward the 200-day moving average near $4,495.
Source: Investing.com
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