Gold heads for weekly drop as Gulf attacks reinforce rate-hike bets

[BENGALURU] Gold edged lower on Friday (Jul 10) and was on track for a weekly fall on concerns that escalating US-Iran tensions could fuel inflation and keep the US Federal Reserve on a hawkish monetary policy path.

Spot gold fell 0.2 per cent to US$4,113.02 per ounce by 0735 GMT and was headed for a 1.5 per cent weekly decline. US gold futures for August delivery slipped 0.4 per cent to US$4,121.90.

“Gold is in consolidation mode today following yesterday’s gains, with traders hesitant to commit to further upside amid the prevailing uncertainty over US-Iran relations,” said Tim Waterer, chief market analyst at KCM Trade.

Oil prices were on track for a weekly gain as the US and Iran continued to trade strikes, with Iranian armed forces launching attacks on US military infrastructure in Gulf states.

The latest round of strikes has fuelled inflation concerns and reinforced the probability of the Fed raising rates this year.

Markets are pricing in a 63 per cent chance of a September rate hike, up from around 54 per cent a week earlier, according to CME’s FedWatch tool.

While gold is typically seen as a hedge against inflation, it loses its appeal as a non-yielding asset in a high-interest-rate environment.

“I expect gold will continue to attract buyers on dips as long as oil stays around current levels. However, any sharp spike in oil could reignite inflation and interest rate fears, which would be to gold’s detriment,” Waterer said.

Minutes of the Fed’s June meeting, released earlier this week, showed growing concerns among policymakers about elevated inflation.

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HSBC cut its average gold price forecasts for 2026 and 2027 on Thursday, citing a hawkish shift in US monetary policy expectations and a stronger US dollar.

Elsewhere, spot silver rose 0.2 per cent to US$60.10 per ounce, platinum gained 1.2 per cent to US$1,629.03 and palladium climbed 2.2 per cent to US$1,274.34. All three metals were on track for weekly losses. REUTERS