Gold prices edged slightly lower on Friday, but the metal is still on track to break a two-week losing streak: escalating tensions in the Middle East are supporting quotes, despite growing expectations that the Federal Reserve may keep interest rates high for a longer period.
As of 00:35 Moscow time, XAU/USD slipped 0.2% to $4,042.72 per ounce, while gold futures remained nearly unchanged at $4,044.92. XAG/USD dropped 0.3% to $57.47 per ounce, and XPT/USD declined 0.5% to $1,589.67.
The Middle East conflict is fueling inflation concerns ahead of the Fed’s meeting
Gold held steady following a nearly 2% drop in the previous session, but it has gained 0.8% in value since the start of the week, marking its first weekly increase in three weeks.
Tensions in the Middle East escalated after Iran-aligned Yemeni Houthis attacked two Saudi oil tankers in the Red Sea. In response, President Donald Trump warned that Washington would hold Iran accountable for any future Houthi attacks on commercial shipping and threatened further military action against Tehran.
The geopolitical situation remained tense after the New York Times reported that Iran rejected a US-backed ceasefire proposal, dampening hopes for a quick de-escalation despite ongoing diplomatic efforts.
The renewed escalation contributed to rising oil prices, while stronger-than-expected US labor market data heightened fears that the Fed might maintain a tight monetary policy. Initial jobless claims unexpectedly fell to 187,000—the lowest level in decades—pushing the yield on benchmark 10-year Treasury notes to its highest since January 2025.
Markets still estimate the probability of a quarter-point rate hike at the upcoming Fed meeting at around 34%, following the release of stronger-than-expected labor data and rising energy prices that have intensified inflation concerns.
Nomura analysts expect the Fed to leave interest rates unchanged, and Chairman Kevin Warsh is unlikely to provide significant forward guidance given the lack of updated economic forecasts and a dot plot at the July meeting.
IG sees a broader recovery intact despite the latest pullback
Tony Sycamore, senior market analyst at IG, noted that the latest decline in gold reflected combined pressure from rising Treasury yields, a strengthening US dollar, and deteriorating risk sentiment amid another escalation in the Middle East.
The USD index held steady after retreating from previous session levels, offering only limited support to gold, as the rise in Treasury yields remained the main headwind.
Sycamore pointed out that the latest pullback did not significantly alter gold’s broader technical outlook: the metal continues to show signs of forming a base above the late-June low of $3,942.
A sustained move above the early-July high of $4,202 would reinforce the bullish scenario and pave the way for a recovery toward the 200-day moving average near $4,495.
Sycamore stated that IG maintains a cautiously optimistic view as long as prices stay above the late-June support level, although the short-term direction will likely be determined by the Fed’s decision next week and developments in the Middle East.
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