Gold Just Had Its Heaviest Weekly Drop in Six Weeks as Oil Surge Fuels Rate Hike Fears
Gold closed the week with $4,010.59 per ounce, and gold weekly price action this week was considered to be its steepest weekly decline since early June. The U.S.-Iran confict and oil rally might strengthen the case for higher U.S. interest rates.
Gold just had its largest weekly loss in six weeks as the intensifying U.S.-Iran conflict drives crude prices sharply higher, reigniting inflation anxieties and bolstering expectations that the Federal Reserve will need to raise interest rates.
Spot gold edged up slightly to $4,010.59 per ounce on Friday today (July 17th), but on the weekly timeframe, it has lost about 2.46% compared to its price a week ago, where it traded at $4,119.32 at the end of trading session on July 10th.
At the same time, crude oil has surged approximately 14% this week as escalating hostilities between Washington and Tehran stoked supply disruption fears. That energy spike threatens to push inflation higher, making rate increases more likely by the Fed.
The hawkish rhetoric from Fed officials is also adding to the pressure. Dallas Fed President Lorie Logan publicly urged a rate hike, while Vice Chair Philip Jefferson indicated he would be receptive to tightening if inflation fails to show near-term improvement. Markets are now assigning a high probability to a December rate increase, (source: CME FedWatch Tool).
In physical markets, gold discounts in India widened to a one-month high as prospective buyers held off in hopes of lower prices, while Chinese premiums remained largely unchanged.
Related assets: Gold, Silver, Palladium, Platinum, Crude Oil, Brent Crude