Gold was set to end the week lower as elevated energy prices continued to fuel expectations the Federal Reserve will need to raise interest rates further to combat inflation. Bullion was trading around $4,270 an ounce, down more than 2% since last Friday. Oil steadied after surging on Thursday as the US and Iran remained at an impasse on restoring energy flows through the Strait of Hormuz.

Negotiators were said to be exploring a phased deal that would see Tehran reopen the critical waterway and Washington lift a port blockade. The impact of persistently high energy costs on the Fed’s rate path has dictated gold’s trajectory in recent weeks as investors gauge whether this will keep inflationary pressures strong enough to prompt more increases, after the first hike in three years last week. Higher borrowing costs are typically negative for bullion as it pays no interest.

Losses in the US Treasuries market intensified Thursday amid inflation fears stemming from the day’s spike in oil prices, as well as concerns about government debt. Yields on 30-year US bonds rose to just shy of 5.5%, the highest in more than two decades. Wall Street is starting to consider that higher yields might be here to stay.

Still, Australian hedge fund manager Raphael Lamm, whose long-short gold fund has delivered a net return of more than 200% to investors since its launch last year, sees the decline in gold prices as temporary, arguing that the key forces underpinning its long-term rally remain intact. Spot gold fell 0.1% to $4,271.54 an ounce at 7:50 a.m. in Singapore. Silver was down 0.2% at $63.68 an ounce and on track to end the week almost 4% lower.

Platinum and palladium were little changed. The Bloomberg Dollar Spot Index, a gauge of the US currency, was steady after five days of gains.