By: Economy Middle East

Gold prices declined on Thursday as the escalating conflict in the Middle East showed little sign of easing, dampening optimism sparked by softer inflation data and raising fears that higher oil prices could reignite inflationary pressures and prompt further interest rate hikes.

As of 4:36 GMT, spot gold fell 0.67 percent to $4,033.12 per ounce, while U.S. gold futures for August delivery slipped 0.33 percent to $4,038.25 per ounce.

In the UAE, gold rates also declined, with 24-carat gold losing AED4 to AED485.75 and 22-carat gold falling AED3.75 to AED449.75.

In addition, 21-carat gold eased AED3.5 to AED431.25 and 18-carat gold declined AED3 to AED369.5.

Meanwhile, 14-carat gold dipped AED2.5 to AED288.25.

Renewed Mideast tensions raise inflation concerns

Gold prices came under pressure on Thursday as intensifying clashes in the Middle East continued to drive oil prices higher, reviving concerns over persistent inflation and reducing expectations for a more accommodative interest rate environment.

Oil prices extended their rally for a fourth consecutive session after the United States launched two rounds of strikes against Iranian coastal defense systems and missile facilities following the reinstatement of a naval blockade on Iranian ports.

Iran responded by targeting U.S. military installations in neighboring countries, describing the confrontation as an existential war with Washington, further escalating fears of a prolonged regional conflict.

Fed rate hike bets remain high despite easing prices

U.S. consumer and producer inflation eased in June, helped by lower energy prices, providing further signs that price pressures were cooling before the latest escalation in Middle East tensions. However, the slowdown was not enough to persuade markets that the Federal Reserve would avoid raising interest rates this year.

Traders are still pricing in roughly a 73 percent probability of a Fed rate hike by December, according to the CME FedWatch Tool.

Fed Governor Lisa Cook said on Wednesday that she was prepared to act if inflation fails to show further signs of easing. Fed Chair Kevin Warsh also reiterated his commitment to bringing inflation under control, though he offered no details on the potential policy path.

Investors are now awaiting comments from Dallas Fed President Lorie Logan and Fed Vice Chair Philip Jefferson, who are scheduled to speak later on Thursday.

Other precious metals

Elsewhere in the precious metals market, spot silver tracked gold prices lower, declining 1.1 percent to $57.14 an ounce. Platinum prices slipped 0.6 percent to $1,664, while palladium edged down 0.3 percent to $1,309.86 per ounce.