Gold prices surged more than 5% this week, putting the metal on track for its largest weekly gain since January. Spot gold traded at $4,262.39 an ounce on Friday, up 0.6% on the day, while US futures rose 0.5% to $4,321.50. The rally lifted bullion from the $4,043 level at the start of the week, though it remains roughly 21% below the record $5,405 reached on 29 January.

The advance was fuelled by a sharp drop in oil prices, which helped calm inflation expectations and reduced the likelihood that the US Federal Reserve would need to keep interest rates elevated for longer. “Hopes for peace in the Middle East have lowered inflation expectations and allowed gold to break higher after a multi-week consolidation above $4,000,” said Matt Simpson, senior analyst at StoneX. President Donald Trump said he believed “the war with Iran will end soon”, and crude oil was on course for a weekly loss. Lower energy costs ease pressure on consumer prices, diminishing the appeal of yield-bearing assets relative to gold, which offers no income.

Markets now price a 55% probability of a US rate increase in September, down from 63% a week ago, according to the CME FedWatch tool. The Federal Reserve held its target rate at 3.5–3.75% on 29 July. Simpson noted that the $4,000 level has become “solid support” and that buyers appear to be waiting for dips to target a move toward $4,600. Traders are focused on the US non-farm payrolls report for July, due later on Friday, which could inject short-term volatility.

In a striking divergence, Iran’s domestic gold and coin market posted negative weekly returns despite the global surge. The rial strengthened and hopes grew for a reopening of the Strait of Hormuz and the start of negotiations, pushing the US dollar exchange rate down to the 187,000-toman range. As a result, 18-karat gold fell 1.04% on the week to 18,597,000 tomans per gram, and the Emami coin dropped 1.48% to 185.2 million tomans. The episode underscored how local currency dynamics and geopolitical expectations can override international price signals in tightly controlled markets.

The next factual milestone is the release of the July US employment report, which will shape near-term interest rate expectations and could test the durability of gold’s move above $4,200.