Gold price breaks below $4,000 as bond yields overpower safe-haven demand

Gold rose modestly on Friday but remained on course for its steepest weekly decline in six weeks, as the inflationary fallout from the renewed US-Iran conflict outweighed softer US price data.

Spot bullion gained 0.5% to $3,988.20 an ounce after earlier touching its lowest level since July 1.

August futures were little changed near $3,992.

Gold has fallen about 3.2% this week, underscoring how quickly the market’s traditional haven trade has been overtaken by concerns about oil, yields and the Federal Reserve.

Oil shock overwhelms softer inflation data

US consumer prices fell 0.4% in June, while producer prices declined 0.3%, offering evidence that inflation was cooling before the latest escalation in the Middle East.

Core CPI was unchanged on the month and increased 2.6% from a year earlier.

Those figures would normally support gold by reducing pressure for higher borrowing costs.

Instead, crude’s roughly 12% weekly surge has made the reports look increasingly backward-looking.

Restricted flows through the Strait of Hormuz and fresh threats to Red Sea shipping have raised concern that transport and production costs will climb again.

KCM Trade strategist Tim Waterer said traders had been unable to embrace the softer inflation readings because the oil shock had revived concerns over inflation and bond yields.

That combination has weakened gold’s haven appeal even as geopolitical risk remains elevated.

Fed hawks keep a year-end hike in play

Dallas Fed President Lorie Logan said borrowing costs should rise modestly because inflation remained too high and the path back to the Fed’s 2% target was fragile.

She argued that current policy was not sufficiently restricting demand and that delaying action could require sharper increases later.

Vice Chair Philip Jefferson said higher rates would typically be warranted when demand exceeds the economy’s capacity and inflation remains above target.

Markets still assign a 73% probability to a December increase, even though expectations for an immediate move have faded.

The tension is unusually stark. The conflict is creating the type of uncertainty that often sends investors towards gold, but its impact on energy prices is strengthening the appeal of interest-bearing assets instead.

Gold tests support below $4,000

Gold’s move below $4,000 has shifted attention to the $3,950 area, with the recent low providing the first important test for buyers.

A sustained break beneath that zone could expose the July 1 trough and deepen the correction.

Any recovery must first reclaim $4,000 and then overcome resistance around $4,050. Until oil stabilises or Treasury yields retreat, rallies may struggle to build lasting momentum.

Silver fell 0.5% to $55.22 an ounce, while platinum and palladium also declined.

All three metals were heading for weekly losses, highlighting the broader pressure across the precious-metals complex.