Gold Slides Amid Signs of Easing US-China Trade Tensions

Gold fell to $4,500 per ounce on Friday, heading for a second consecutive weekly decline, as elevated oil prices fueled inflation concerns and boosted expectations for a US interest rate hike this year. Crude held near four-year highs as investors remained cautious about the prospects for a breakthrough in US-Iran peace talks. Iranian media reported that Iran’s foreign minister met Pakistan’s interior minister on Friday to discuss proposals to end the war, while US Secretary of State Marco Rubio noted "slight progress" in mediated talks but warned that Washington and Tehran were "not there yet" on a peace deal. The prolonged conflict and inflation pressures led markets to price in a Federal Reserve rate hike before year-end, with about a 55% chance of at least one 25-basis-point increase by October. Supporting this view, Fed Governor Christopher Waller signaled he no longer believed the central bank should maintain an easing bias in its policy statement.

Gold hovered above $4,500 an ounce on Friday and was on track to finish the week little changed, as conflicting signals surrounding US-Iran peace negotiations kept investors cautious over inflation risks and the outlook for interest rates. Tehran stated that the latest US proposal had partially bridged the gap between the two sides. However, reports that Iran’s Supreme Leader ordered the country’s enriched uranium stockpile to remain within its borders complicated negotiations, as dismantling Iran’s nuclear program remains a key US objective. Iran is also reportedly in talks with Oman on establishing a permanent toll system that would formalize its control over shipping traffic through the Strait of Hormuz, though President Donald Trump rejected the idea. Despite the recent stability, gold prices remain about 14% lower since the conflict began, amid concerns that an energy-driven inflation shock could prompt central banks to tighten monetary policy.

Gold fell toward $4,500 an ounce on Thursday as hopes for a US-Iran peace deal faded following reports that Iran’s Supreme Leader Ayatollah Mojtaba Khamenei issued a directive ordering the country’s uranium to remain on Iranian soil. The directive contradicted Israeli officials’ claims that Iran’s highly enriched uranium would need to be transferred out of the country as part of any peace deal, according to Reuters. Meanwhile, Iran is reportedly restoring its military capacity at a faster pace than expected, stoking fears of a renewed conflict in the Middle East. The prospect of a prolonged conflict sent oil prices back toward four-year highs, adding to inflation concerns and raising expectations that central banks may need to tighten monetary policy. Also, minutes from the Federal Reserve’s latest policy meeting showed that most officials believe a rate increase this year could still be warranted if inflation remains above the Fed’s 2% target.