Gold Set for First Weekly Gain in Three Weeks as Geopolitical Risks Counter Fed Rate Outlook

Gold prices were poised to record their first weekly gain in three weeks, as escalating geopolitical tensions in the Middle East bolstered the metal's safe-haven appeal, offsetting pressure from expectations that the U.S. Federal Reserve will maintain a restrictive monetary policy.

As of 21:35 ET, spot gold (XAU/USD) traded at $4,042.72 an ounce, a slight 0.2% decline on the day but up 0.8% for the week, according to Investing.com data. Gold futures were little changed at $4,044.92 an ounce.

Geopolitical Tensions Drive Safe-Haven Bids

Investor demand for gold was supported by a tense geopolitical backdrop. Hostilities in the Middle East intensified after Yemen’s Iran-aligned Houthis attacked two Saudi oil tankers in the Red Sea, according to the source material. The New York Times also reported that Iran had rejected a U.S.-backed ceasefire proposal, diminishing hopes for a near-term de-escalation.

The conflict has contributed to higher oil prices, adding to inflation concerns that typically benefit gold. However, the immediate market reaction has focused on gold's role as a store of value during times of uncertainty.

Hawkish Fed Outlook Caps Gains

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Countering the geopolitical support were strong U.S. economic indicators that reinforced the case for the Federal Reserve to keep interest rates elevated. Data showed initial jobless claims unexpectedly fell to 187,000, their lowest level in decades. This news pushed the benchmark 10-year Treasury yield to its highest point since January 2025.

Higher Treasury yields increase the opportunity cost of holding non-yielding bullion, creating a headwind for gold prices. Markets are currently pricing in a roughly 34% probability of a quarter-point rate increase at the Fed's upcoming meeting. However, analysts at Nomura said they expect the central bank to leave rates unchanged, according to the report.

Market Analysis and Technical Levels

Other precious metals saw modest declines, with silver falling 0.3% to $57.47 an ounce and platinum down 0.5% to $1,589.67. The U.S. Dollar Index was little changed, offering limited direction for dollar-denominated gold.

Tony Sycamore, a senior market analyst at IG, noted that gold's broader technical outlook remains intact despite the pullback. He stated that the metal appears to be forming a base above its late-June low of $3,942. A sustained move above the early-July high of $4,202 would strengthen the bullish case, potentially paving the way for a rebound toward the 200-day moving average near $4,495, Sycamore said.