Gold Slides as Oil Tops $100. Is $4,000 the Next Key Test?

Gold remained under pressure on Friday, hovering near $4,050 an ounce after tumbling 2% in the previous session, as surging oil prices and rising Treasury yields dampened demand for the precious metal.

The latest pullback comes as the conflict in the Middle East entered a new phase. Following the collapse of last month's ceasefire agreement, President Donald Trump threatened to intensify military action against Iran and warned Tehran would be held responsible for any future Houthi attacks on shipping in the Red Sea.

Brent crude has now broken above $100 a barrel for the first time since May, reviving fears that higher energy costs could reignite inflation.

That has prompted investors to reassess the outlook for US monetary policy. Markets are now pricing in roughly a 34% chance of a Federal Reserve rate hike at next week's meeting, with at least one additional hike expected in September.

Higher oil prices, together with a resilient US labor market, have pushed two-year Treasury yields higher for a sixth consecutive session, reducing the appeal of non-yielding assets such as gold.

TD Securities strategists led by Ryan McKay said fast-money traders have "rapidly shifted back to selling gold" as inflation concerns resurfaced alongside the sharp rally in energy prices.

The $4,000 level is now the market's key line in the sand.

Gold has traded around this area since late June, making it an important technical support zone. A sustained break below $4,000 could trigger another round of selling, while buyers will need easing geopolitical tensions or renewed expectations of Fed policy easing to regain momentum.

For now, as long as oil prices remain elevated and rate-hike expectations continue to build, gold may struggle to regain its recent upward momentum.