FX.co ★ Gold Steadies After Sharp Drop as Markets Assess Middle East Risks

Gold prices held near $4,050 per ounce on Friday, stabilizing after an almost 2% decline in the previous session, as investors tracked developments in the Middle East for signals on energy-driven inflation risks and the trajectory of US interest rates. Rising oil prices, fueled by concerns over potential supply disruptions in the Gulf, have strengthened expectations that interest rates may stay elevated for longer, dampening the appeal of non-yielding gold. Markets now look ahead to next week’s Federal Reserve meeting, where policymakers are widely expected to leave rates unchanged, though futures still imply roughly an 80% probability of a rate hike in September. Elsewhere, the European Central Bank kept rates on hold on Thursday but left open the possibility of an increase in September. In Asia, Indian gold discounts widened to a seven-week high as elevated prices pressured demand, while buying interest picked up in China.