Rising geopolitical risks are complicating the picture further. Messages from Iran regarding the Hormuz Strait have heightened perceived energy risks. At this point, investors are closely watching both energy prices and today’s critical U.S. inflation data.

Oil Price Rally Pressures Gold

On Friday morning, spot gold traded around $5,112 per ounce, gaining roughly 0.7% intraday. April U.S. gold futures saw a slight decline, settling at $5,116.

The drop in the U.S. 10-year Treasury yield could provide some support for non-yielding gold. Nevertheless, weekly performance shows more than a 1% decline. The key driver remains energy prices: the return of oil toward $100 raises expectations for renewed inflation pressure in the U.S. In market terms, as oil rises, the likelihood of Fed rate cuts gets delayed.

Hormuz Strait Tensions Ignite Energy Market

Tensions in the Middle East have escalated this week. Iran’s Supreme Leader, Ayatollah Mojtaba Khamenei, said Tehran could use the strategic Hormuz Strait as leverage against the U.S. and Israel.

This statement triggered immediate reactions in the energy market. Attacks on Gulf oil tankers and stern warnings from Iran have undermined hopes that the conflict would ease quickly. Brent crude neared the $100 mark again, reviving global energy supply concerns and directly influencing inflation expectations.

Eyes on Fed Decision and PCE Inflation Data

Meanwhile, U.S. President Donald Trump again called on Fed Chair Jerome Powell to lower interest rates. Market expectations, however, point elsewhere.

According to CME FedWatch, investors anticipate the Fed will keep rates in the 3.5–3.75% range at its two-day meeting ending March 18.

The main focus for markets is today’s release of the U.S. January Personal Consumption Expenditures (PCE) index. As the Fed’s preferred inflation measure, this data could reshape expectations for the central bank’s interest rate path.

On the metals front, gains were modestly positive. Spot silver rose 1% to $84.59 per ounce. Platinum gained 1.2% to $2,157, while palladium increased 1.1% to $1,636 per ounce.

Energy prices saw a small pullback. The U.S. issued 30-day licenses allowing countries to purchase stranded Russian crude and petroleum products, slightly easing prices. Brent remained around $99.8, and WTI crude stayed near $95 per barrel.

Why Is Gold Falling?
Rising oil prices increase inflation risks, weakening expectations for a Fed rate cut. Higher interest rate expectations typically place downward pressure on gold prices.

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Warsh Factor: Markets Digest a More Hawkish Fed Scenario

Former Fed governor Kevin Warsh was nominated in January by President Donald Trump to replace Jerome Powell, whose term ends in May.

Since then, investor sentiment has turned cautious.

Crypto market analyst Nic Puckrin says Warsh’s nomination triggered late-January weakness in precious metals and early-February volatility across risk assets.

“Markets are digesting Warsh’s views on future Fed policy, especially the balance sheet, which he believes is ‘trillions larger than it needs to be.’ If balance-sheet reduction accelerates, investors will face a structurally lower-liquidity environment.”

In simple terms: less liquidity, tighter financial conditions. Not exactly a friendly setup for risk assets.

Crypto Markets Feel the Pressure as Liquidity Expectations Shift

Interest-rate policy remains a key driver for crypto prices. Easing financial conditions typically support Bitcoin and altcoins. Tightening cycles, however, reduce leverage, dry up credit, and dampen speculative appetite.

Thomas Perfumo, global economist at Kraken, described Warsh’s nomination as a mixed macro signal.

On one hand, it hints at policy stability. On the other, it weakens expectations for aggressive liquidity expansion — a narrative many crypto investors had quietly leaned on.

Perfumo noted that Warsh’s potential leadership suggests US liquidity and credit conditions may stabilize rather than loosen, challenging recent bullish assumptions.

Bottom Line: Small Cut Priced In, Direction Still Unclear

Heading into March, markets are balancing two competing forces.

Rate-cut expectations are rising. But the prospect of a more hawkish Fed leadership is tempering enthusiasm.

Traders are pricing only a modest 25-bps cut. There’s little conviction behind larger moves. Meanwhile, no clear liquidity expansion story has emerged.

That leaves both traditional markets and crypto assets vulnerable in the short term.

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