Gold managed small gains on Friday afternoon even as broader market forces left bullion poised to finish the week in the red. At 16:35 ET (20:35 GMT), spot gold was trading up 0.3% at $4,285.76 per ounce, while gold futures had risen 0.6% to $4,321.62 per ounce.
Despite the intraday uptick, the precious metal has come under significant pressure during the week. Spot prices were down about 2.1% and futures around 2.3% over the period, leaving the yellow metal to shed roughly 2% for the week.
Market participants pointed to a steep climb in U.S. Treasury yields and a corresponding increase in expectations for tighter Federal Reserve policy as primary headwinds. The sell-off in bonds - most pronounced in longer-dated government debt - rattled precious metals traders and also weighed on U.S. equity markets. The benchmark U.S. 10-year yield climbed to its highest level since June 2007 earlier in the week, while the 30-year yield reached its highest since June 2004.
Bond markets initially welcomed the Fed’s recent interest rate hike as evidence the central bank would act forcefully to curb inflation. But subsequent hawkish remarks from policymakers and robust U.S. business activity data have pushed markets to price in a greater chance of additional tightening. According to the CME FedWatch tool, the odds of a quarter-point rate increase in October have risen.
Higher interest rate expectations typically weigh on non-yielding assets such as gold. Elevated yields also tend to strengthen the dollar, making bullion relatively more expensive for holders of other currencies and further pressuring gold prices.
Still, ANZ analysts noted that investment demand for gold has remained resilient through the recent volatility, reporting "no material liquidation so far" even amid the difficult macroeconomic backdrop. Analysts highlighted that in the near term the path for gold will remain closely tied to movements in oil prices, Treasury yields and evolving expectations for the Fed’s next moves.
Energy and geopolitics
Oil prices fell on Friday after media reports suggested U.S. and Iranian officials were exploring a phased arrangement to reopen the Strait of Hormuz. Traders reacted to the report even though there was no official diplomatic breakthrough announced between Washington and Tehran during the week.
Crude has experienced notable swings in recent sessions. Earlier in the week, diplomatic engagement at the United Nations General Assembly in New York raised hopes of progress between the U.S. and Iran. That momentum cooled after sharply worded speeches by President Donald Trump and Iran’s Masoud Pezeshkian at the UN, but Trump subsequently confirmed that indirect talks between U.S. representatives and the Iranian delegation had taken place on the sidelines of the Assembly.
U.S. Secretary of State Marco Rubio later tempered expectations, saying he would not call the discussions a "major breakthrough" but described them as more of a "continuation of conversations that have occurred in the past."
Iran’s foreign ministry spokesperson Esmaeil Baqaei said on Thursday that a round of messages had been exchanged with the U.S. through Qatari mediation. Baqaei said Tehran had set out conditions for returning to negotiations, which included the "cessation of aggressive U.S. actions, including the naval blockade and economic terrorism; ending the war on all fronts; release of Iran’s frozen or restricted assets; acceptance of a safe shipping route in the manner agreed upon between the two coastal governments."
Meanwhile, President Xi Jinping’s first state visit to the U.S. since 2015 concluded on Friday. Some investors had anticipated that China - a major buyer of Iranian crude and Iran’s largest trading partner - might have been part of conversations on the oil issue between Xi and Trump.
On Friday, U.S. Ambassador to China David Perdue told CNBC: "We made it very clear to them weeks ago that any help that they would give Iran, whether it be direct or indirect, whether it be intelligence or parts or military equipment, was totally unacceptable. President Trump made that very clear again yesterday."
Outlook and interplay between markets
Traders and analysts say gold’s immediate trajectory will be determined by three main variables: the evolution of Treasury yields, the path of oil prices influenced by geopolitical developments, and the market’s assessment of the Fed’s policy stance. The recent interplay among those factors has amplified volatility in precious metals, with safe-haven flows, yield dynamics and currency movements all contributing to gold’s swings.
For now, the market is watching closely for additional signals from policymakers, fresh economic data and any credible diplomatic progress that could alter energy market risk premiums. Until one of those levers changes materially, investors can expect gold to remain sensitive to developments in bonds, oil and central bank communications.
Roushni Nair and Scott Kanowsky contributed to reporting on the developments mentioned in this article.