Gold traded around $4,200 per ounce on Friday as falling oil prices on US-Iran peace optimism failed to offset growing expectations of higher global interest rates.

Key Highlights

  • Gold hovered near $4,200 per ounce, on track for its second straight weekly decline.
  • Oil prices fell on optimism over a possible US-Iran deal, easing inflation-linked safe haven demand.
  • The European Central Bank raised interest rates on Thursday for the first time since 2023.
  • US producer prices rose 6.5% year-over-year in May, reinforcing Federal Reserve rate hike expectations.

Gold prices remained under pressure on Friday, trading close to $4,200 per ounce and heading for a second consecutive weekly loss. The metal's decline came even as crude oil tumbled on growing hopes for a US-Iran peace agreement, a development that would typically be expected to ease inflation fears and support bullion.

Instead, the gold price weakness reflects a broader shift in interest rate expectations. President Donald Trump suggested over the weekend that a deal with Iran could be reached imminently, though Tehran maintained that no final decision had been made, leaving the geopolitical backdrop fluid.

Since the Iran conflict escalated, gold has struggled against a backdrop of surging energy costs, which have stoked concerns that inflation could remain elevated for longer. This dynamic has reinforced expectations that major central banks will keep monetary policy tight rather than easing rates in the near term.

Adding weight to that view, the European Central Bank raised interest rates on Thursday for the first time since 2023, while simultaneously revising its inflation forecasts for 2026 and 2027 higher. The move signalled that policymakers in Europe see persistent price pressures tied to the energy shock from the Middle East.

In the United States, producer prices climbed 6.5% year-over-year in May, a figure that underscores how the Middle East energy disruption is feeding through into broader cost pressures. The data has strengthened bets that the Federal Reserve could deliver a rate hike later this year, a scenario that typically weighs on non-yielding assets such as gold.

For gold price investors, the current setup illustrates a tug-of-war between safe haven demand tied to geopolitical risk and the headwind from rising real interest rates, with the latter currently dominating price action heading into the weekend.