Gold Extends Losses

Gold prices fell toward $4,030 per ounce on Friday, extending a nearly 2% decline in the previous session, as surging oil prices fueled by the escalating Middle East conflict strengthened the case for tighter US monetary policy. President Donald Trump warned of expanded military action against Iran and vowed to hold Tehran accountable for any future Houthi attacks on commercial vessels in the Red Sea, helping lift Brent crude above $100 a barrel for the first time since May. Higher oil prices stoked inflation fears, boosting expectations of tighter Fed policy and pressuring non-yielding assets. Markets currently assign a 34% probability to a Fed rate hike next week, while the odds of a September increase have climbed above 81%. Meanwhile, fresh US tariffs of 10%–12.5% on imports from major trading partners added to the uncertain market backdrop. Gold is still heading for a modest weekly gain.

Gold prices fell below $4,100 per ounce on Thursday, pulling back from two-week highs as escalating tensions in the Middle East lifted oil prices and fueled expectations that the US Federal Reserve could raise interest rates later this year. The Iran-backed Houthis said they had targeted two Saudi oil tankers as part of a naval blockade, raising concerns over a potential new chokepoint for global oil supplies. Meanwhile, the US carried out a 12th consecutive night of strikes on Iran, prompting further retaliation and intensifying fears of prolonged disruptions to Gulf energy exports. Higher oil prices have reinforced inflation concerns, leading investors to expect the Fed to keep monetary policy tighter for longer, a backdrop that typically weighs on non-yielding assets such as gold. Money markets are currently pricing in roughly a 78% probability of a Fed rate hike in September.

Gold fell below $4,100 per ounce on Thursday, easing from a two-week high, as escalating Middle East tensions pushed oil prices higher. Iran-backed Houthi militants claimed attacks on two Saudi oil tankers in the Red Sea, raising risks of broader energy supply disruptions, while President Trump warned of strikes on Iranian infrastructure if shipping through the Strait of Hormuz is targeted. The developments pushed crude prices to fresh six-week highs, keeping inflation pressures elevated and reinforcing expectations that interest rates could stay higher for longer. Investors now looked ahead to next week’s Federal Reserve meeting, where policymakers are expected to keep rates unchanged. Still, markets continue to price in the possibility of a rate hike later this year, with traders assigning a 61% probability of an increase in September. Elsewhere, the ECB is widely expected to hold rates steady but keep the door open to a potential September hike.