Gold Price Holds Weekly Gain as Middle East Tensions and Fed Rate Outlook Drive Market

Gold prices slipped slightly on Friday but remained on course for their first weekly gain in three weeks, as escalating Middle East tensions boosted demand for safe-haven assets despite growing expectations that the Federal Reserve may keep interest rates higher for longer.

Spot gold (XAU/USD) eased 0.2% to $4,042.72 an ounce, while Gold Futures were little changed at $4,044.92. Silver (XAG/USD) fell 0.3% to $57.47 an ounce, and platinum (XPT/USD) declined 0.5% to $1,589.67.

Bullion recovered from Thursday’s nearly 2% decline and is up about 0.8% for the week, supported by heightened geopolitical uncertainty. Market sentiment deteriorated after Yemen’s Iran-backed Houthi forces attacked two Saudi oil tankers in the Red Sea. President Donald Trump warned that the United States would hold Iran responsible for any future Houthi attacks on commercial shipping and threatened additional military action against Tehran.

Safe-haven demand also strengthened after reports that Iran rejected a U.S.-backed ceasefire proposal, reducing hopes for a near-term easing of regional tensions. The conflict has pushed oil prices higher, fueling concerns that rising energy costs could keep inflation elevated.

Meanwhile, stronger-than-expected U.S. labor market data reinforced expectations that the Federal Reserve will maintain a restrictive monetary policy. Initial jobless claims unexpectedly fell to 187,000, the lowest level in decades, while the benchmark 10-year Treasury yield climbed to its highest level since January 2025.

Markets currently assign roughly a 34% probability of a 25-basis-point Federal Reserve rate hike at next week’s policy meeting. Nomura analysts expect the Fed to leave rates unchanged, noting that Chair Kevin Warsh is unlikely to offer significant forward guidance because the July meeting will not include updated economic projections or a revised dot plot.

According to IG senior market analyst Tony Sycamore, gold’s latest pullback reflects the combined impact of rising Treasury yields, a firmer U.S. dollar, and weaker investor sentiment. However, he believes the broader recovery remains intact as long as gold holds above the late-June support level near $3,942. A sustained move above the early-July high of $4,202 could strengthen bullish momentum and open the way toward the 200-day moving average around $4,495. Investors are expected to closely monitor next week’s Fed decision and further developments in the Middle East for the next major catalyst in gold prices.