Gold Prices Headed for Weekly Loss as Oil Soars and Rate Hike Odds Rise

Gold prices were mixed on Friday but still headed for a weekly decline of nearly 2%, weighed down by an uptick in Federal Reserve rate hike expectations, a sell-off in U.S. Treasury bonds, and soaring oil prices.

The contracts had lost 1.9% each this week, with spot gold also set for a three-week losing streak, according to the latest data.

The recent surge in oil prices due to an escalation between the U.S. and Iran has further exacerbated inflationary worries and put pressure on Americans at the pump, with U.S. diesel prices surpassing $6 a gallon for the first time ever on Thursday.

CPI data released this week swung the Fed policy outlook towards rate hike, with the probability of a quarter-point increase surging to nearly 87% after the inflation data from about 69% before, according to the CME FedWatch tool. Higher rate environments tend to weigh on non-yielding assets such as gold.