By: Economy Middle east

Gold prices dropped to their lowest level in more than a week on Friday and were heading for a weekly loss, as rising energy prices stoked inflation concerns and reinforced expectations of higher interest rates. Investors were also closely watching the meeting between U.S. President Donald Trump and Chinese President Xi Jinping.

Spot gold fell for a fourth consecutive session, declining 1.40 percent to $4,611.88 an ounce by 4:25 GMT, its weakest level since May 6. The precious metal has lost 2.18 percent so far this week. Meanwhile, U.S. gold futures for June delivery fell 1.53 percent to $4,613.72 an ounce, and were headed for a 2.42 percent weekly decline.

In the UAE, gold rates declined, with 24-carat gold losing AED7.25 to AED556.5 and 22-carat gold easing AED6.75 to AED515.25.

Additionally, 21-carat gold fell AED6.5 to AED494, and 18-carat gold edged down AED5.5 to AED423.5.

Meanwhile, 14-carat gold fell AED4.25 to AED330.25.

Inflation reports reduce expectations for U.S. interest rate cuts

The U.S. dollar has risen more than 1 percent this week, making dollar-denominated bullion more expensive for holders of other currencies. Meanwhile, benchmark 10-year U.S. Treasury yields climbed to near one-year highs, raising the opportunity cost of holding non-yielding gold.

In energy, Brent crude oil prices have gained 5.5 percent this week, remaining above $106 a barrel as the Iran war continues and the Strait of Hormuz stays largely closed. Gold prices have fallen around 13 percent since the U.S.-Iran conflict erupted in late February, as elevated energy costs fuel inflation concerns and strengthen expectations for higher U.S. interest rates.

A series of inflation reports released this week highlighted the risk that higher energy costs could spread to other goods and services, reducing expectations for near-term U.S. interest rate cuts.

Although gold is traditionally viewed as a hedge against inflation, higher interest rates typically pressure the non-yielding asset.

Trump and Xi discuss Iran conflict, energy security and trade relations

Gold prices fell as investors monitored the summit in Beijing between Trump and the Chinese President, where talks have focused on the Iran conflict, energy security and trade relations. According to White House statements, both leaders agreed that the Strait of Hormuz must remain open to protect global energy flows.

Trump and Xi are scheduled to meet again on Friday to conclude a two-day state visit marked by ceremonial events and business agreements.

U.S. Trade Representative Jamieson Greer said on Friday that China had taken a “very pragmatic” approach toward Iran, adding in an interview that keeping the Strait of Hormuz open was a key priority for Beijing.

Analysts said expectations that China could encourage Iran toward a broader resolution had helped contain some of the recent rally in oil prices. However, Trump struck a more hawkish tone on Iran in a recent interview, saying he would not remain patient with Tehran much longer and urging it to reach an agreement with Washington.

Other precious metals

The precious metals market declined on Friday, tracking gold prices. Spot silver dropped 2.58 percent to $81.32 per ounce, while platinum fell 1.81 percent to $2,018.57, and palladium declined 0.81 percent to $1,425.51.