Investing.com — prices on Friday snapped a two-week losing streak, as technical buying at the key $4,000/oz level helped counter an increasingly bearish environment for the yellow metal amid soaring oil-driven inflationary concerns.
A surge in U.S. Treasury yields have most clearly reflected this week’s rise in inflationary jitters, as traders have dumped government bonds and added to their expectations for Federal Reserve interest rate hikes. The central bank’s monetary policy decision next week is now squarely in focus.
ticked up 0.1% to settle at $4,052.98/oz, while gold futures added 0.1% as well to settle at $4,055.25/oz. Both gained about 0.9% for the week.
Gold finds support even as dollar rises amid spiking oil
Bullion prices rebounded this week after hitting lows last seen in early November, finding support around the key psychological level of $4,000/oz.
“Gold began a fight-back rally this time last week after falling to an eight-month low below $3,960. By Wednesday afternoon it had topped $4,160 for an overall move of $200 per ounce, or 5%. But it was unable to build on these gains, particularly as the U.S. dollar roared back to life after dropping significantly on soft U.S. inflation data. The escalation in hostilities between the U.S. and Iran, the stronger oil price and the jump in U.S. Treasury yields saw the dollar bounce and gold slump,” David Morrison, senior market analyst at Trade Nation, said.
“Despite this, and while lower cycle lows remain a danger for the bulls, support has been building just south of $4,000. This will need to hold, and gold will need to break above $4,200 with real conviction to spark the market into life again following the dismal downward correction since the end of January,” he added.
According to the CME FedWatch tool, the odds of the central bank holding rates steady at its monetary policy committee meeting next week stand at about 62%, versus around 87% a week ago. The odds of a quarter-point hike have ticked up to nearly 38% from around 13% a week ago.
The climb in oil prices came to a head on Thursday, with , the global benchmark, topping $100 a barrel for the first time since May. They were on track for a more than 25% jump in two weeks. The advance came after Iran-backed Houthi militants in Yemen said they had launched attacks at Saudi Arabian tankers in the Red Sea.
The Houthis pose a danger to ships transiting the Bab el-Mandeb Strait, another key chokepoint in the region apart from the Strait of Hormuz. With both vital waterways under threat, worries over oil supply disruptions have been exacerbated.
Fighting between the U.S. and Iran has showed little signs of stopping. U.S. Central Command on Thursday said it had completed a 13th straight night of strikes against Iran. Tehran has responded by targeting U.S. military bases primarily in Bahrain, Kuwait, and Jordan.
Mediation efforts also appear to be failing, after the New York Times reported that Iran had rejected a U.S.-backed ceasefire proposal delivered by Iraqi Prime Minister Ali al-Zaidi, citing Iranian and Iraqi officials.
Also adding to inflationary concerns were trade tensions. This week, President Donald Trump imposed new double-digit tariffs on imports from 60 of the top trading partners of the U.S., just days after hitting Canada with an additional 50% tariffs. The efforts represent the White House’s latest bid to wrench back control over an aggressive international trade stance that has been rebuffed in court.
Roushni Nair, Scott Kanowsky, and Jaiveer Shekhawat contributed to this article