Gold prices hovered around $4,050 per ounce on Friday, holding a nearly 2% decline in the previous session, as surging oil prices fueled by the escalating Middle East conflict strengthened the case for tighter US monetary policy.
President Donald Trump warned of expanded military action against Iran and vowed to hold Tehran accountable for any future Houthi attacks on commercial vessels in the Red Sea, helping lift Brent crude above $100 a barrel for the first time since May.
Higher oil prices stoked inflation fears, boosting expectations of tighter Fed policy and pressuring non-yielding assets.
Markets currently assign a 34% probability to a Fed rate hike next week, while the odds of a September increase have climbed above 78%.
Meanwhile, fresh US tariffs of 10%–12.5% on imports from major trading partners added to the uncertain market backdrop.
Gold is still heading for a modest weekly gain.