Daily September WTI Crude Oil Futures
The fighting between Israel and Iran kept geopolitical risk elevated, but gold traders were more interested in what the conflict could mean for oil prices than the military headlines themselves.
Crude oil rallied through the week as traders priced in the possibility of supply disruptions across the Middle East. Higher energy prices immediately raised questions about inflation. If oil keeps moving higher, gasoline, transportation and production costs are likely to follow. That’s the part of the story the gold market couldn’t ignore.
Normally, geopolitical tensions are enough to bring buyers into gold. This week was different. The concern wasn’t simply that the conflict could spread. The concern was that higher oil prices could make the Federal Reserve’s job even harder.
Fed Repricing Did More Damage Than Any Headline
The rates market remained the biggest influence on gold Friday.
Earlier inflation reports suggested price pressures were continuing to cool. Under normal circumstances, that would have supported expectations for lower interest rates later this year. Instead, traders questioned whether those inflation trends would hold if crude oil continues climbing. That pushed Treasury yields higher and gave the U.S. dollar another boost. Neither move was friendly for gold.