Gold prices were on course to record their biggest weekly decline in six weeks on Friday, July 17, 2026, as rising tensions between the United States and Iran fuelled a surge in oil prices, strengthening expectations of higher US interest rates and weighing on the precious metal.

Chief Market Analyst at KCM Trade, Tim Waterer, said spot gold rose 0.5% to US$3,988.20 per ounce by 0313 GMT after hitting its lowest level since July 1 earlier in the session, while U.S. gold futures for August delivery traded at US$3,992 per ounce.

Despite the modest recovery, gold has lost 3.2% this week, putting it on track for its steepest weekly decline since June 1, 2026.

"Even with tamer CPI and PPI figures, the oil price spike this week meant traders simply couldn't celebrate the cooler inflation numbers," Waterer said.

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The latest decline comes as escalating military exchanges between the United States and Iran pushed oil prices sharply higher, raising concerns that inflation could accelerate again and prompt the US Federal Reserve to keep interest rates higher for longer.

According to market data, oil prices have climbed about 12% this week amid disruptions to shipments through the Strait of Hormuz and concerns that the Red Sea export route could also be be affected.

Higher oil prices are expected to increase inflationary pressures, reducing the appeal of non-interest-bearing assets such as gold.

"Geopolitical risks in the Middle East are still present, with inflation and yield concerns being the dominant forces holding gold back," Waterer explained.

The outlook for interest rates also weighed on investor sentiment after Dallas Federal Reserve President Lorie Logan backed another rate hike, while Federal Reserve Vice Chair Philip Jefferson indicated he would also support tighter monetary policy if inflation fails to improve.

Waterer noted that higher interest rates generally reduce the attractiveness of gold because the precious metal does not generate interest or dividend income, prompting investors to shift funds into higher-yielding assets.

Meanwhile, spot silver fell 0.5% to US$55.22 per ounce, platinum declined 0.7% to US$1,605.62, while palladium eased 0.4% to US$1,244.86 per ounce. All three precious metals were also on track to post weekly losses.

ANAS/MA

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