Gold prices fell on Friday after US President Donald Trump declared that the ceasefire with Iran was over, despite agreeing to continue negotiations. Spot gold (XAU/USD) dropped 0.4% to about $4,103 an ounce as renewed energy-supply concerns strengthened expectations for higher US interest rates.
Market Snapshot
Spot gold was trading at $4,103.23 an ounce at 1810 GMT, leaving bullion about 1.7% lower for the week. US gold futures for August delivery settled 0.7% down at $4,113.70.
The US Dollar Index (DXY) held near 100.94, while the benchmark 10-year Treasury yield rose by about two basis points to 4.569%. A stronger dollar makes gold more expensive for buyers using other currencies, while higher bond yields increase the opportunity cost of holding non-yielding bullion.
Other precious metals were mixed. Silver fell 0.7% to $59.56 an ounce, while platinum gained 0.4% to $1,616.72 and palladium rose 2.2% to $1,274.50.
Ceasefire Declared Over
Trump said Washington had agreed to Iran’s request to continue talks, but told Tehran that the ceasefire reached in June was no longer in effect. Iran disputed the account, saying it had not requested direct talks but had accepted Qatar as a mediator.
The announcement followed a week of renewed hostilities. Three Qatari and Saudi commercial tankers came under fire near the Strait of Hormuz, prompting US strikes on Iranian sites. Iran subsequently attacked US military facilities in Gulf states.
No new attacks were reported on Friday as Qatari officials held discussions in Tehran and Iran prepared separate talks with Oman on maritime security. The United States demanded a public Iranian commitment to stop attacks on vessels and allow unrestricted passage through the strait.
Oil Fuels Rate Concerns
The conflict has complicated gold’s traditional role as a haven. Although geopolitical uncertainty can support bullion, the associated rise in oil prices has revived concerns that inflation will remain elevated.
Higher inflation could force the Federal Reserve to maintain restrictive monetary policy or raise interest rates again. Markets priced in about a 69% probability of a rate increase at the Fed’s September meeting, according to the CME FedWatch Tool.
“The major factor here is the restarting of tensions between the US and Iran,” said Bart Melek, global head of commodity strategy at TD Securities. He said investors had become reluctant to hold gold and silver as prices approached $4,100.
Minutes from the Fed’s June meeting showed officials remained concerned about broad inflation pressures. A few policymakers saw a case for an immediate rate increase, although the wider committee remained divided over the outlook.
Hormuz Remains Central
The Strait of Hormuz carried about one-fifth of global oil and liquefied natural gas shipments before the conflict. Disruption to tanker traffic has increased freight and insurance costs and raised concerns about fuel supplies across Asia, Europe and North America.
Oil prices recorded their largest weekly rise in eight weeks as markets assessed whether the latest confrontation would produce sustained shipping interruptions. The International Energy Agency said renewed hostilities could also disrupt expectations for a sizeable oil-market surplus in 2027.
“There has just been a lot more doubt on whether or not the ceasefire is going to hold,” said Jim Barnes, director of fixed income at Bryn Mawr Trust.
Outlook
Gold’s next direction may depend less on immediate haven demand than on how the conflict affects oil, inflation and monetary policy. A renewed surge in crude prices could lift Treasury yields and the dollar, placing further pressure on bullion.
Traders will watch negotiations led by Qatar and Oman, shipping conditions in the Strait of Hormuz and any further US or Iranian military action. Attention will also turn to the next US inflation report and Federal Reserve Chair Kevin Warsh’s testimony to Congress for guidance on whether a September rate rise remains likely.
