Gold prices edged lower on Friday but were still set to end the week higher, as fresh geopolitical flare-ups in the Middle East provided support for bullion despite growing market expectations that the Federal Reserve could keep interest rates higher for an extended period.
At 21:35 ET (01:35 GMT), XAU/USD fell 0.2% to $4,042.72 an ounce, while Gold Futures were little changed at $4,044.92. XAG/USD declined 0.3% to $57.47 an ounce, while XPT/USD fell 0.5% to $1,589.67.
After dropping nearly 2% in the prior session, gold was largely range-bound on Friday but had added 0.8% over the week so far, marking its first weekly advance in three weeks. The metal's modest rebound reflected a tug-of-war between geopolitical risk premiums and the tightening bias suggested by U.S. economic data.
Geopolitics and commodity reaction
Escalating hostilities in the Middle East contributed to the risk premium for commodities. Yemen's Iran-aligned Houthis attacked two Saudi oil tankers in the Red Sea, an action that prompted President Donald Trump to warn that Washington would hold Iran responsible for any future Houthi attacks on commercial shipping and to threaten further military action against Tehran. Separate reporting indicated that Iran had rejected a U.S.-backed ceasefire proposal, dimming hopes for a quick de-escalation even as diplomatic efforts continued.
The renewed tensions helped lift oil prices, adding another layer of inflation concern to markets already watching U.S. economic indicators closely.
Economic data and rate expectations
Stronger-than-expected U.S. labor market data added to the case that the Federal Reserve could sustain a restrictive policy stance. Initial jobless claims unexpectedly fell to 187,000, their lowest level in decades. That surprise contributed to a rise in the benchmark 10-year Treasury yield to its highest level since January 2025, keeping upward pressure on real yields and weighing on non-yielding assets like gold.
Markets continued to price roughly a 34% probability of a quarter-point rate increase at next week’s Federal Reserve meeting after the combined surprises from labor market strength and higher energy prices.
Nomura analysts said they expect the Fed to leave interest rates unchanged, and noted that Chair Kevin Warsh is unlikely to provide meaningful forward guidance given the absence of updated economic projections or a dot plot at the July meeting.
Market positioning and technical outlook
Tony Sycamore, senior market analyst at IG, attributed gold’s recent decline to the combined effects of higher Treasury yields, a firmer U.S. dollar and weaker risk sentiment following the latest escalation in the Middle East. The U.S. Dollar Index was little changed after easing from the previous session’s gains, providing limited support to bullion as higher Treasury yields remained the dominant headwind.
Sycamore said the retreat had not materially altered gold’s broader technical picture. He noted bullion was showing signs of forming a base above the late-June low of $3,942. According to his view, a sustained move above the early-July high of $4,202 would bolster the bullish case and could clear a path toward the 200-day moving average near $4,495.
IG remained cautiously bullish while prices hold above the late-June support level, Sycamore added, though he emphasized that near-term direction will likely hinge on next week’s Federal Reserve decision and on developments in the Middle East.
Bottom line
Gold entered the weekend with modest losses on the day but was on track to snap a two-week losing run, supported by geopolitical risk and oil price gains. At the same time, robust U.S. jobs data and higher Treasury yields have left markets weighing the possibility of continued Fed tightness, a dynamic that will likely determine whether bullion can extend its tentative weekly recovery.