Gold Rises on Middle East Tensions as Markets Brace for U.S. Jobs Report

Gold prices extended gains on Friday as escalating tensions in the Middle East bolstered the metal's safe-haven appeal, offsetting the effects of a stable U.S. dollar. Market participants are now cautiously awaiting key U.S. employment data for fresh insights into the Federal Reserve's potential monetary policy path.

As of 1:04 AM ET, spot gold (XAU/USD) was up 0.6% at $4,264.22 per ounce, while gold futures rose by a similar margin to $4,323.07. Other precious metals also advanced, with spot silver gaining 1.2% and platinum climbing 0.6%.

Geopolitical Risks Fuel Demand

The primary driver for gold's upward momentum was a deteriorating security situation in the Strait of Hormuz, a critical waterway for global oil shipments. According to Iranian media reports, Tehran launched strikes against what it termed "hostile targets" and announced plans to bar U.S. and Israeli vessels from the strait.

Adding to regional instability, Houthi militants in Yemen claimed responsibility for a large-scale attack on Saudi-backed government forces, fueling concerns of a wider conflict. These developments typically increase investor demand for safe-haven assets like gold during times of geopolitical uncertainty.

Fed Policy and Jobs Data in Focus

While geopolitical factors provided support, traders remained focused on the Federal Reserve. The prospect of higher energy prices resulting from the Middle East conflict could exacerbate inflation, potentially strengthening the case for the Fed to maintain a restrictive policy stance. According to Investing.com, the market is currently pricing in an approximately 60% probability of a rate hike in September.

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This sentiment was echoed in a *Financial Times* report suggesting Fed Chair Kevin Warsh was prepared to raise rates if inflation remains elevated. Separately, St. Louis Fed President Alberto Musalem stated that policymakers cannot ignore persistent inflation while waiting for productivity gains to ease price pressures.

Investors are now looking ahead to the U.S. non-farm payrolls report, due later on Friday, as the next major test for Fed policy expectations. Strong employment figures could reinforce the central bank's hawkish bias.

Market Outlook

Support for gold has also come from strong physical demand, particularly from China, where gold-backed exchange-traded funds (ETFs) have recorded 14 consecutive days of inflows, according to the source. This consistent buying has helped establish a price floor amid macroeconomic headwinds.

Tony Sycamore, a senior market analyst at IG Group, noted that gold may have established a bottom near its late-June low of around $3,942. He suggested that if prices hold above this support level, a move toward the 200-day moving average at approximately $4,489 could be next. The outcome of Friday's jobs report will be a key factor in determining whether the current breakout has sustained momentum.