Gold was on course for its steepest weekly decline in six weeks on Friday, with spot prices hovering near $3,988 an ounce after touching the lowest since 1 July. The precious metal has shed more than 3 per cent this week, as a roughly 12 per cent surge in oil prices—triggered by intensifying US-Iran military exchanges and threats to Red Sea shipping—overwhelmed the supportive effect of softer American inflation data.

The jump in crude has rekindled inflation anxieties and hardened expectations that the Federal Reserve will need to keep interest rates elevated, or even raise them further. Non-yielding gold typically struggles when borrowing costs rise, because investors favour assets that offer a yield. “Even with tamer CPI and PPI figures, the oil price spike this week meant traders simply couldn’t celebrate the cooler inflation numbers,” said Tim Waterer, chief market analyst at KCM Trade.

Hawkish signals from senior Fed officials reinforced the pressure. Dallas Fed President Lorie Logan became the first of Chairman Kevin Warsh’s new colleagues to publicly call for a rate increase, while Vice Chair Philip Jefferson indicated he would be open to tightening if inflation does not improve in the near term. Kansas City Fed President Jeff Schmid separately stressed that persistent price pressures remain the focus of monetary policy. According to the CME FedWatch Tool, traders now price a 73 per cent probability of a rate hike at the December meeting.

The sell-off extended across the precious metals complex, with silver, platinum and palladium all heading for weekly losses. Looking ahead, market attention will turn to a batch of US data—including housing starts, industrial production and the University of Michigan consumer sentiment survey—for further clues on the economy’s trajectory. The trajectory of oil prices, and any further disruption to Gulf energy flows, will also be closely watched.