Gold (XAU/USD) extended its losses for the eighth consecutive day on Friday, poised to end the week down by more than 8.50% as oil prices continued to rally and US Treasury yields surged, boosting the US Dollar's haven appeal and weighing heavily on bullion prices [1]. At the time of writing, XAU/USD trades at $4,560, down nearly 2% on the day, while the US Dollar Index (DXY) is up 0.43% at 99.58 [1]. However, Source 2 reports the DXY slipped back below 100.00 to 99.60 on Friday after a mid-week surge driven by the Federal Reserve's decision to hold rates in the 3.50%-3.75% range [2].
The escalation of the Middle East conflict, particularly the war in Iran nearing its fourth week and the effective closure of the Strait of Hormuz, has pushed oil prices higher, with West Texas Intermediate (WTI) trading near $98.29 per barrel, up nearly 4% [1][2]. Israel's attacks on Iran's energy facilities triggered retaliation, impacting energy infrastructure in Gulf states such as Saudi Arabia, Qatar, and Kuwait [1]. Reports indicate the Pentagon is deploying thousands of additional Marines to the region, suggesting a swift resolution is unlikely [2].
US Treasury bond yields have risen sharply, with the 10-year note soaring nearly 14 basis points to 4.384%, signaling that investors are not expecting rate cuts and are instead beginning to price in rate increases this year [1]. The Federal Reserve delivered a hawkish hold last Wednesday, with Chair Jerome Powell stating, "If I do not see disinflation progress, I won't see a rate cut" [1]. Despite this, the dot plot in the Summary of Economic Projections (SEP) showed policymakers are still eyeing a rate cut amid the Middle East conflict [1]. Fed Governor Christopher Waller told CNBC he initially planned to support a rate cut based on the jobs report, but rising inflation has shifted his focus, noting that prolonged high oil prices can eventually impact core inflation [1]. Fed Governor Michelle Bowman stated she had penciled in three rate cuts this year, expecting strong economic growth but still seeing a weak labor market [1].
Technical analysis suggests gold is poised to test $4,000 if it breaches $4,400, having already fallen below the 100-day Simple Moving Average (SMA) at $4,581. A daily-weekly close beneath the February 2 cycle low of $4,402 would clear the path to challenge the 200-day SMA at $4,066 [1]. The market structure still supports a neutral-to-bullish bias, but the downside risk remains elevated. Looking ahead, the US economic calendar will feature Flash PMIs, Current Account, Jobless Claims, and Wholesale Inventories [1].
Currency markets also reflected the volatility, with EUR/USD trading near 1.1550 after touching fresh 2026 lows earlier in the week, GBP/USD hovering around 1.3330, USD/JPY near 159.30, and AUD/USD at 0.7010 [2]. The US Dollar was the strongest against the Australian Dollar, gaining 1.09% [2].
CONCLUSION
Gold experienced a sharp weekly decline, pressured by surging oil prices, rising US yields, and a hawkish Federal Reserve stance amid escalating Middle East tensions. The market is pricing out rate cuts, and technical signals point to further downside risk for gold. The ongoing conflict and elevated oil prices are likely to keep volatility high across commodities and currency markets in the near term.