Investing.com — edged higher on Friday, but were on pace for their biggest weekly decline in over a month, as flaring tensions in the Middle East pushed up oil prices and fueled worries over inflation-driven policy tightening. Those concerns outweighed economic data that showed a moderation in U.S. price pressures in June, prompting traders to dial back near-term rate hike expectations.
climbed 1% to settle at $4,017.23/oz, while gold futures added 0.8% to settle at $4,022.40/oz. For the week, the former was down 2.5%, while the latter slipped 2.2%.
Track gold, Fed expectations and inflation risks with InvestingPro – now 60% off
Bullion has seen a push-and-pull this week, as positive data on inflation has been countered by the resurgence in oil prices and statements from a clutch of Federal Reserve speakers which have highlighted ongoing concerns over sticky price pressures.
The headline U.S. consumer price index (CPI) and producer price index (PPI) readings moderated on a monthly basis in June, while gasoline station retail sales fell. University of Michigan data, meanwhile, showed July consumer sentiment hitting its highest level since February, and a fall in year-ahead inflation expectations.
The deluge of data indicated some breathing room for the Federal Reserve in terms of not immediately hiking interest rates. Inflationary dynamics have rapidly shifted this week, however, as oil prices have spiked amid the biggest escalation in tensions between the U.S. and Iran since they inked an interim peace deal.
Fed officials, including Chair Kevin Warsh, Governor Christopher Waller, and New York Fed President John Williams, have stressed that inflation remains too high to justify easing monetary policy. Notably, Dallas Fed President Lorie Logan on Thursday called for “modestly higher” interest rates. Higher rate environments tend to weigh on non-yielding assets such as gold.
“While softer June CPI and PPI figures initially bolstered investor sentiment, hawkish comments from Fed officials suggest that borrowing costs may remain elevated to combat persistent price pressures,” Neil Welsh, head of metals at Britannia Global Markets, said.
In the Middle East, Iran launched a fresh barrage of air attacks at U.S. facilities on Friday, after American military forces targeted Iranian military sites.
U.S. Central Command said on Thursday evening that it had concluded a sixth consecutive night of strikes on Iran. CENTCOM said the attacks were aimed at further degrading Iranian military capabilities and “holding Iran accountable” for attacks on commercial shipping.
Iranian media also reported that the latest U.S. attacks had struck some civilian infrastructure, including five bridges and a railway station.
All of this has left the fate of the Strait of Hormuz mired in uncertainty. Tanker traffic through the narrow waterway has been disrupted once again, denting hopes just a few weeks ago that a fragile ceasefire agreement would allow flows to restart.
Against this backdrop, oil prices advanced, with in particular on track for a more than 15% weekly gain.
Roushni Nair, Scott Kanowsky, and Anuron Mitra contributed to this article