Gold is headed for its most significant weekly decline in six years, driven by Middle East tensions that have pushed up energy costs and reduced expectations for interest rate cuts. On Friday, the price of gold hovered near $4,640 per ounce, marking a weekly drop of approximately 7%—the largest since March 2020. Soaring oil and natural gas prices resulting from the conflict have intensified inflation concerns, thereby diminishing the likelihood of central banks lowering borrowing costs. This creates a headwind for gold, which generates no interest income.

The precious metal, widely regarded as a safe-haven asset, has declined each week since the U.S. and Israel struck Iran at the end of last month. During this period, U.S. Treasury yields and the U.S. dollar have both strengthened, prompting investors to sell gold to cover losses in other areas. Gold-backed exchange-traded funds have also experienced outflows.

Midweek, the U.S. Federal Reserve held a policy meeting and, as widely expected, decided to keep interest rates unchanged. Chair Jerome Powell emphasized that officials would need to see further progress on reducing inflation before restarting accommodative policy.

Spot gold was quoted at $4,645.59 per ounce, largely unchanged on the day. Silver traded near $72.41 per ounce, down about 10% for the week. Palladium and platinum were also on track for weekly losses.