Gold heads for biggest weekly loss in six as U.S.-Iran conflict fuels rate hike bets

Gold was on track Friday for its steepest weekly decline in six weeks, weighed down by a surge in oil prices tied to escalating hostilities between the United States and Iran that reignited inflation concerns and bolstered expectations that U.S. interest rates will stay higher for longer.

Spot gold touched its lowest level since July 1, and the metal had shed more than 3% for the week as of early Friday trading, according to Reuters. The decline marks the largest weekly drop since the week ending June 1.reuters

Oil Surge Overwhelms Soft Inflation Data

The week's losses came despite a brief reprieve on Tuesday, when softer-than-expected June U.S. inflation data sent gold up more than 2% in a single session. The consumer price index rose 3.5% year-over-year in June, down from 4.2% in May, while core CPI was flat on a monthly basis.cnbc

That rally quickly faded as traders refocused on the implications of surging energy costs. Oil prices jumped roughly 12% over the course of the week, driven by intensifying clashes around the Strait of Hormuz. Brent crude climbed to a one-month high above $86 per barrel on Tuesday after the U.S. reimposed a naval blockade on Iran and bombed military targets along its coast for a third consecutive day, according to Reuters and CNBC. Iran's Revolutionary Guard attacked tankers transiting the strait, and the United Arab Emirates' state oil company ADNOC said two of its vessels were struck, killing one mariner.reuters+2

The crisis traces back to the collapse of a fragile ceasefire. President Donald Trump declared at the NATO summit in Ankara that the memorandum of understanding signed with Iran in June was "over" and called negotiations a "waste of time," as reported by The Hill. The Treasury Department also revoked a 60-day sanctions waiver on Iranian oil, cutting off authorized transactions as of July 17.aljazeera+1

Rate Hike Bets Weigh on the Non-Yielding Metal

Higher energy prices feeding into inflation have strengthened the case for the Federal Reserve to raise interest rates, a headwind for gold, which yields nothing. Markets priced in a roughly 68% chance of a rate hike in September as of mid-week, up from 62% the day before, according to the CME FedWatch ↗ 0.21% tool. The Fed held the federal funds rate at 3.50%–3.75% at its June meeting, and the next decision is due July 29.growbeansprout+1

"Gold will remain under pressure in the coming sessions, with the prospects of new 2026 lows rising against a backdrop of heightened geopolitical tensions and Fed rate hike bets," said Nikos Tzabouras, senior market analyst at Jefferies-owned Tradu.com. Silver, platinum, and palladium were also headed for weekly losses.cnbc+1