FX.co ★ Gold Steadies After Sharp Weekly Drop

Gold held near $4,500 per ounce on Monday, stabilizing after its sharpest weekly drop since 1983, as investors closely monitored escalating tensions in the Middle East. The conflict between Iran and the US showed few signs of de-escalation: President Donald Trump threatened strikes on Iranian power plants if the Strait of Hormuz remains closed, while Tehran warned it would target key US and Israeli assets across the region should its energy infrastructure come under attack.

Last week, gold slumped more than 10% as surging oil prices fueled inflation concerns, leading markets to reassess the outlook for monetary policy and to factor in a prolonged pause—or even possible rate hikes—by major central banks. Traders are increasingly positioning for a potential Federal Reserve rate increase toward the end of the year amid worries that inflation will remain stubbornly high. The European Central Bank, Bank of England and Bank of Japan also left interest rates unchanged last week, but all signaled they remain prepared to tighten policy further if inflationary pressures persist.