U.S.-Iran clashes and a sharp oil rally have revived inflation concerns and bolstered expectations for tighter Federal Reserve policy, pressuring bullion despite softer U.S. inflation data.
Gold was set for its biggest weekly loss in six weeks on Friday as escalating U.S.-Iran clashes pushed oil prices sharply higher, reviving inflation concerns and strengthening the case for higher U.S. interest rates. Spot gold rose 0.5% to $3,988.20 an ounce by 0313 GMT after earlier touching its lowest level since July 1, while August U.S. gold futures were steady at $3,992. Even with softer June U.S. CPI and PPI readings, bullion has fallen 3.2% this week as the oil surge and rising yield concerns outweighed support from cooler inflation data. Oil prices were up about 12% for the week because of limited flows from the Strait of Hormuz and concerns over the Red Sea route, reinforcing the view that higher energy costs could reignite inflation. Dallas Federal Reserve President Lorie Logan called publicly for a rate hike, while Fed Vice Chair Philip Jefferson said he would be open to raising rates absent near-term improvement in inflation. Traders were pricing a 73% chance of a December rate hike, according to the CME FedWatch Tool. Silver, platinum and palladium also fell on the day and were headed for weekly losses.