Gold Clips Weekly Losses Amid Bargain Buying Despite Middle East Inflation Concerns

Gold prices edged upward Friday after a sharp selloff the day before, buoyed by bargain hunting even as the metal is still headed for its largest weekly loss since early June. Tensions in the Middle East continue to stir inflation worries, particularly around energy costs, keeping a lid on bullion's rally.

By early U.S. trading hours, XAU/USD nudged up nearly half a percent, moving close to $3,995 per ounce, while Gold Futures were just shy of $4,000. Meanwhile, silver slipped slightly, and platinum dipped more than 2%, reflecting mixed sentiment across precious metals.

The week's decline for gold stands at around 3%, fueled in part by a firm U.S. dollar and rising Treasury yields. Another round of U.S. strikes against Iranian targets and incidents near key oil shipping lanes have extended the Middle East conflict into its fifth month, pushing crude prices higher and sparking worries about the knock-on effects on inflation.

Elevated oil prices add complexity to the Federal Reserve's monetary policy decisions, with higher energy costs raising the odds inflation will stay stubbornly above the Fed's 2% target. This backdrop supports a stronger dollar and higher bond yields, both of which tend to dampen demand for non-yielding assets like gold.

Recent U.S. inflation data, including consumer and producer price figures, suggested some easing in core price pressures. Yet, market participants remain cautious, focused more on the upward energy price momentum that could reverse any softening trend in inflation.

Federal Reserve officials, including Chair Kevin Warsh and New York Fed President John Williams, have reiterated that inflation risks persist and expressed reluctance to ease monetary policy without clear, sustained evidence of price stabilization or decline.

Analysts note that while gold has hovered near the psychologically important $4,000 level in recent weeks, breaking decisively below the late-June low of around $3,942 could open the door to prices retesting lows last seen in 2025 near $3,886. Conversely, reclaiming resistance levels around $4,140 would provide technical encouragement.

The tug-of-war between geopolitical uncertainty fueling inflation fears and bargain hunting amid price dips keeps gold in a delicate position. As the situation in the Middle East unfolds, scrutiny on oil prices and subsequent inflation data may dictate the trajectory of bullion in the near term.