Gold steadied early on Friday as markets evaluated the inflation risks arising from the recent U.S.-Iran military escalation in the Middle East, with renewed expectations for rate hikes positioning the non-yielding metal for a weekly decline. Spot gold maintained its position at $4,122.09 per ounce, as of 0047, and was on track for a decline exceeding 1% for the week. U.S. gold futures for August delivery experienced a decline of 0.2%, settling at $4,131.50. Iranian armed forces initiated assaults on U.S. military installations in Gulf states on Thursday, a response to U.S. airstrikes targeting Iran’s southern coastal and eastern provinces, thereby undermining a ceasefire that had been in place for three weeks.

The recent wave of strikes has intensified inflation apprehensions and bolstered the likelihood of the U.S. Federal Reserve increasing interest rates within the year. Markets are currently assigning a 64% probability to a September rate hike, an increase from approximately 54% just a week prior, as indicated by CME’s FedWatch tool. Minutes from the Fed’s June meeting, released earlier this week, indicated increasing apprehensions among policymakers regarding persistent inflation, with several participants suggesting a rationale for elevating interest rates.

New York Fed President John Williams stated on Thursday that he does not anticipate a sustained increase in energy prices for the remainder of the year, even in light of renewed hostilities in the Middle East. The number of Americans filing new claims for unemployment benefits decreased last week, indicating that the labour market continued to exhibit stability despite a deceleration in job growth observed in June. HSBC revised downward its average gold price forecasts for 2026 and 2027 on Thursday, attributing this adjustment to a hawkish shift in expectations surrounding U.S. monetary policy and the strengthening of the dollar.

The National Bank of Poland holds 632.4 tonnes of gold reserves, valued at approximately 308 billion zlotys, as stated by NBP Governor Adam Glapinski on Thursday. Fortuna Mining anticipates obtaining the final permit for its Diamba Sud gold project in Senegal in the coming weeks, according to statements made by its chief executive. Elsewhere, spot silver eased 0.1% to $59.94 per ounce, while platinum gained 0.2% to $1,614.22 and palladium added 0.4% to $1,252.75. All three metals were poised to register a weekly decline.