Gold prices ended a two-week losing streak on Friday as buyers returned near the key $4,000-per-ounce level. Technical demand helped the precious metal resist pressure from rising oil prices, stronger inflation expectations and higher U.S. Treasury yields.
Investors are now turning their attention to the Federal Reserve’s upcoming monetary policy decision. Expectations of another interest rate increase have risen sharply during the past week.
Spot gold gained 0.1% to settle at $4,052.98 per ounce. U.S. gold futures also rose 0.1%, closing at $4,055.25 per ounce.
Both contracts advanced by approximately 0.9% for the week.
Gold Finds Support Near $4,000
Gold prices recovered after falling to levels last seen in early November.
The metal attracted strong buying interest around $4,000 per ounce, an important psychological and technical support zone. This helped gold stabilise despite an increasingly difficult macroeconomic environment.
Gold had previously fallen below $3,960, marking an eight-month low. It then climbed above $4,160 by Wednesday afternoon, producing a recovery of roughly $200 per ounce, or 5%.
However, the rally lost momentum as the U.S. dollar strengthened.
Stronger Dollar Limits Gold’s Recovery
David Morrison, senior market analyst at Trade Nation, said gold began recovering after hitting its recent low.
However, the metal struggled to extend its gains after the U.S. dollar rebounded from losses triggered by softer U.S. inflation data.
Rising tensions between the United States and Iran, surging oil prices and higher Treasury yields all supported the dollar. These factors placed renewed pressure on gold.
A stronger dollar usually makes gold more expensive for buyers using other currencies. This can reduce international demand for the metal.
Gold Bulls Watch the $4,200 Resistance Level
Although gold has attracted support below $4,000, further declines remain possible.
According to Morrison, buyers will need to defend the current support zone to prevent another bearish move.
Gold may also need to break decisively above $4,200 per ounce to restore stronger bullish momentum. Without such a breakout, the market could remain trapped in the downward correction that began at the end of January.
The $4,000 support level and the $4,200 resistance zone are therefore likely to remain important for traders.
Treasury Yields Rise on Inflation Concerns
U.S. Treasury yields climbed during the week as investors sold government bonds.
Higher yields reflected growing concerns that inflation could remain elevated. Traders also increased their expectations that the Federal Reserve may raise interest rates again.
Rising bond yields can reduce gold’s appeal because the precious metal does not pay interest.
When returns on government bonds increase, some investors may prefer income-producing assets instead of holding gold.
Fed Rate-Hike Expectations Increase
According to the CME FedWatch tool, markets assigned a probability of around 62% to the Federal Reserve keeping interest rates unchanged at its next meeting.
That figure had stood near 87% one week earlier.
Meanwhile, the probability of a 25-basis-point rate increase rose to almost 38%, compared with roughly 13% the previous week.
This rapid shift in expectations shows how higher oil prices and renewed inflation concerns have affected the interest-rate outlook.
Oil Climbs Above $100 per Barrel
Brent crude futures moved above $100 per barrel on Thursday for the first time since May.
The global oil benchmark was also on track to gain more than 25% over two weeks.
Prices rose after Iran-backed Houthi militants in Yemen said they had attacked Saudi Arabian tankers in the Red Sea.
The attacks increased concerns about possible disruptions to global energy supplies.
Key Shipping Routes Face Growing Risks
The Houthis pose a threat to vessels travelling through the Bab el-Mandeb Strait.
This passage is one of the most important shipping routes connecting the Red Sea with the Gulf of Aden. It is also a major route for global trade and energy transportation.
The Strait of Hormuz, another critical oil transit point, is also facing increased security risks.
With both waterways under threat, investors are becoming increasingly concerned about supply shortages and further increases in oil prices.
U.S.-Iran Conflict Shows Few Signs of Easing
The conflict between the United States and Iran continued to intensify.
U.S. Central Command said it had completed a 13th consecutive night of strikes against Iran.
Tehran responded by targeting U.S. military bases, mainly in Bahrain, Kuwait and Jordan.
The continued escalation has increased demand for safe-haven assets. However, gold has struggled to benefit fully because rising oil prices are also strengthening inflation expectations and supporting higher interest rates.
Ceasefire Efforts Appear to Stall
Attempts to negotiate a ceasefire have shown limited progress.
The New York Times reported that Iran rejected a U.S.-backed ceasefire proposal delivered by Iraqi Prime Minister Ali al-Zaidi.
The report cited Iranian and Iraqi officials.
The apparent failure of mediation efforts has increased concerns that the conflict could continue and place further pressure on regional shipping and oil supplies.
New U.S. Tariffs Add to Inflation Pressure
Trade tensions also contributed to the increasingly uncertain outlook.
President Donald Trump announced new double-digit tariffs on imports from 60 of the United States’ largest trading partners.
The move came only days after Washington imposed an additional 50% tariff on Canadian imports.
Tariffs can increase the price of imported goods and disrupt international supply chains. When combined with higher energy costs, they may create broader inflationary pressure across the economy.
Gold Outlook Depends on the Fed and Oil Prices
Gold remains caught between competing market forces.
Geopolitical uncertainty and safe-haven demand continue to provide support. However, a stronger dollar, higher Treasury yields and the prospect of additional Federal Reserve rate increases are limiting gains.
The next major move may depend on whether gold can remain above $4,000 and eventually break through the $4,200 resistance level.
Investors will also closely monitor oil prices, U.S.-Iran developments, trade policy and the Federal Reserve’s upcoming decision.
