Gold heads for weekly loss as high oil prices feed inflation worries

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Gold prices edged higher on Thursday, buoyed by a softer dollar and safe-haven demand fueled by uncertainty surrounding U.S. tariff policy and U.S.-Iran talks.

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Gold prices fell more than 1% on Friday and were headed for a similar-sized weekly loss, as ​elevated oil prices ​continued to fan inflation concerns that would discourage central banks from cutting interest rates.

Spot gold was down 1.1% at $4,568.82 per ounce, and ⁠on ‌track for a weekly loss of 1.2%. U.S. gold futures for June delivery fell 1.1% to $4,579.70.

“Gold remains negatively correlated to oil in the short term, as it impacts interest rate expectations,” said UBS analyst Giovanni Staunovo. Iran said ‌on Thursday it would respond with “long and painful strikes” on U.S. positions if Washington renewed attacks, reiterating its claim to the Strait ​of Hormuz.

Brent crude prices have touched double the levels seen at the start of the year, raising concerns about a global economic slowdown and higher inflation as fuel prices surge. U.S. inflation ⁠accelerated in March as the war raised gasoline prices, reinforcing expectations that the Federal ‌Reserve could keep interest rates on hold well ‌into next year. The European Central Bank and the Bank of England left interest rates unchanged on Thursday, following similar decisions this week by the Fed and the ⁠Bank of Japan.

Gold, traditionally seen as a hedge against geopolitical uncertainty and ⁠inflation, can come under pressure in a high interest rate ⁠environment as it loses its appeal to yield-bearing assets like U.S. Treasuries.

However, Staunovo said UBS retained a constructive outlook over ​the next six to 12 ‌months. “Uncertainty surrounding upcoming (U.S.) midterm elections, expectations of a weaker U.S. dollar over time, and declining real interest rates (as the Fed cuts) will likely support investment demand alongside continued central bank demand.”

He added that these factors could drive prices towards $5,900/oz by ​late 2026.

Spot silver prices fell 0.6% ‌to $73.27 per ounce, platinum was down 1.3% at $1,960.30, and palladium lost 0.6% to $1,515.37.

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