Key Highlights
- Spot gold declined 0.6% on Friday to $4,101.11 per ounce, heading toward a 1.8% weekly decline
- President Trump ended the Iran ceasefire and authorized additional military operations
- Climbing oil prices are intensifying inflation concerns, boosting expectations for a Fed rate increase in 2026
- Elevated interest rates negatively impact gold by raising the opportunity cost of holding the non-interest-bearing asset
- Silver tumbled more than 4% this week; platinum demonstrated resilience with only a 0.3% weekly drop
The yellow metal experienced downward pressure on Friday and is poised to finish the week lower, pressured by intensifying U.S.-Iran military confrontations and mounting concerns regarding interest rate policy.
Spot gold decreased 0.6% to reach $4,101.11 per ounce. Gold futures contracts fell 0.8% to $4,108.90. Throughout the week, spot gold registered approximately a 1.8% decline.
Other precious metals also faced selling pressure. Spot silver declined 0.7% on Friday and posted a weekly loss exceeding 4%. Platinum dipped 0.1% lower on Friday but demonstrated better performance with a modest weekly decrease of only 0.3%.
Middle East Conflict Creates Market Uncertainty
The downturn in gold was predominantly driven by intensifying hostilities in the Middle East. President Donald Trump announced the termination of the ceasefire agreement with Iran and authorized new military strikes. Iran countered with retaliatory measures.
Reporting from Axios indicated that regional intermediaries were working to preserve a recently negotiated U.S.-Iran memorandum of understanding. Nevertheless, prospects for regional stability remained questionable.
The renewed military escalation propelled oil prices significantly higher. This development heightened worries about energy-fueled inflation resurfacing as the Federal Reserve continues monitoring price developments carefully.
Market participants increased their expectations for a Fed rate hike in 2026 during the week, based on CME Fedwatch data.
Interest Rate Concerns Diminish Gold’s Safe-Haven Attraction
Rising interest rates present challenges for gold. Since the metal generates no income, increasing rates enable investors to secure better returns from bonds and alternative fixed-income securities. This dynamic reduces gold’s relative appeal.
ANZ analysts observed that gold received limited support from expectations that the Middle East situation would not deteriorate substantially. However, they emphasized that worries about persistent inflation and the Fed maintaining elevated rates for an extended period continued pressuring valuations.
Gold has generally failed to perform as a reliable safe haven since the U.S.-Iran confrontation commenced. Concerns about monetary policy have overshadowed demand for the metal as a protective asset during geopolitical uncertainty.
The dollar stabilized this week following previous week’s declines. A firmer dollar typically creates headwinds for gold, which is denominated in U.S. currency.
Platinum demonstrated superior resilience compared to gold and silver throughout the week. Its 0.3% weekly retreat was considerably smaller than the declines experienced by other precious metals.
Market participants will remain focused on any Middle East developments and potential changes in Federal Reserve messaging that could influence rate expectations in coming weeks.
At the time of writing, spot gold was trading at $4,102.64, down $21.18 on the day.
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