Tensions in the Middle East combined with expectations of interest rate hikes, and gold prices fell

Highlights

Contents

Highlights

Conflict in the Middle East intensifies market volatility

Interest rate concerns weaken gold\'s safe-haven position

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Spot gold fell 0.6% on Friday to close at $4,101.11 an ounce, Cumulative decline of 1.8% this week

President Trump terminated the Iranian ceasefire agreement and authorized additional military action

Soaring crude oil prices have sparked inflation concerns, and market expectations for a 2026 Federal Reserve interest rate hike have risen

Rising interest rates have increased the cost of holding zero-yield assets. Weakened the appeal of gold.

Silver plunged more than 4% this week; platinum performed tough, with a weekly decline of only 0.3%.

Precious metals came under pressure on Friday. Gold may fall this week due to increased military tensions between the United States and Iran coupled with rising interest rate concerns.

Spot gold fell 0.6% to US$4,101.11 an ounce. Gold futures contracts fell 0.8% to $4,108.90. In terms of weekly performance, spot gold fell by about 1.8%.

Gold August contract (GC=F)

Other precious metals also weakened. Spot silver fell 0.7% on Friday and fell more than 4% this week. Platinum fell slightly 0.1% on Friday, with a weekly decline of only 0.3%.

Conflict in the Middle East exacerbates market volatility

Precious metals sell-off mainly stems from the escalation of conflict in the Middle East. President Donald Trump has announced the end of the Iranian ceasefire and authorized new military action. Iran responded with retaliatory measures.

Axios reported that regional mediators are trying to uphold the memorandum of understanding recently signed between the United States and Iran. However, the prospects for lasting peace in the region are becoming increasingly remote.

The escalation of conflict pushed crude oil prices sharply higher. The move has sparked concerns about a comeback in energy-related inflation, while the Federal Reserve is still closely monitoring price pressures.

Market participants this week raised their expectations for the probability of a Fed rate hike in 2026, based on data from the Chicago Mercantile Exchange\'s (CME) Fed Observation Tool.

Interest rate concerns weaken gold\'s safe-haven position

Rising interest rates pose a major challenge to gold investment. Because precious metals do not generate yields, higher interest rates allow investors to obtain higher returns from fixed-income securities such as bonds, undermining gold\'s relative appeal.

ANZ analysts pointed out that the market expects that the conflict in the Middle East will not escalate further, which provides moderate support for gold. But they stressed that continued inflation concerns and market expectations that the Fed\'s high interest rates will continue to put pressure on gold prices.

Since the confrontation between the United States and Iran intensified, gold has performed significantly poorly as a safe-haven asset. In times of geopolitical turmoil, interest rate anxiety overshadowed market demand for gold as a wealth preservation tool.

The dollar stabilized this week after falling in the previous week. A stronger dollar usually puts pressure on gold prices, which are denominated in dollars.

Platinum showed relatively stronger resilience than gold and silver this week. Its weekly decline of 0.3% is much smaller than the decline of other precious metals.

Market participants will continue to monitor the development of the situation in the Middle East and any signals that the Fed may change its future interest rate expectations.

As of press time, spot gold was quoted at US$4,102.64 per ounce, down US$21.18 during the day.

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