Gold Dips as Middle East Tensions Lift Oil, Weigh on Rate-Cut Bets

Gold prices attempted a recovery on Friday, climbing back above $4,700 per ounce as cautious optimism emerged over potential progress in US-Iran peace negotiations. According to Al-Jazeera, Iranian Foreign Minister Abbas Araghchi is scheduled to arrive in Islamabad on Friday evening, citing Pakistani government sources. These sources indicated a "high likelihood of a breakthrough" in the ongoing talks between the United States and Iran. The visit follows recent Iranian-Pakistani talks on a ceasefire, though uncertainties remain. US President Donald Trump reiterated he wants a "great deal" but is "not in a rush." Still, gold faces an over 2% weekly decline as peace negotiations have shown limited progress so far, and the continued closure of the Strait of Hormuz has driven energy prices higher. Rising inflation risks and potential rate hikes continue to weigh on non-yielding bullion.

Gold held below $4,700 an ounce on Friday and was on track to decline about 3% for the week, as escalating tensions between the US and Iran over the Strait of Hormuz drove energy prices higher and intensified inflation concerns. Both sides have maintained their blockades of the strategic waterway, with peace negotiations showing little progress. President Donald Trump also said in a social media post on Thursday that he had ordered the US Navy to “shoot and kill” vessels laying mines in the strait, while US forces also boarded a supertanker carrying Iranian oil in the Indian Ocean. Meanwhile, the US-Iran ceasefire has been extended indefinitely as Washington awaits a new formal proposal from Tehran, while the truce between Israel and Lebanon has also been prolonged by three weeks. Elevated energy prices have heightened inflation risks and bolstered expectations of potential central bank rate hikes, weighing on the appeal of non-yielding bullion.

Gold fell toward $4,700 an ounce on Thursday, giving back gains from the previous session as markets continued to grapple with elevated uncertainty in the Middle East and the ongoing blockage of the Strait of Hormuz, which has kept energy prices high and inflation risks elevated. Tehran has maintained control over the waterway, restricting nearly all international traffic and reportedly firing on commercial vessels this week. The US has also upheld its blockade of Iranian ports to intensify pressure on the Islamic Republic, a move Tehran has condemned as a breach of the ceasefire. Meanwhile, President Donald Trump said the current truce would remain in place indefinitely as Washington awaits a new peace proposal from Iran. Gold has faced sustained pressure since the conflict began, as surging energy prices have fueled inflation concerns and raised the prospect of central bank rate hikes. The precious metal is currently down roughly 10% since the onset of the war.