By: Economy Middle East

Gold prices declined on Thursday as investors digested comments from U.S. Federal Reserve Chair Kevin Warsh on addressing inflation after the central bank kept interest rates steady at its latest policy meeting.

Spot gold fell 0.60 percent to $4,042.10 per ounce by 5:09 GMT, following a surge of as much as 2 percent in the previous session. Meanwhile, U.S. gold futures for August delivery advanced 0.17 percent to $4,043.

In the UAE, gold rates edged lower, with 24-carat gold losing AED4 to AED487.5 and 22-carat gold declining AED3.5 to AED451.5.

In addition, 21-carat gold dipped AED3.5 to AED432.75 and 18-carat gold ticked down AED3 to AED371.

Meanwhile, 14-carat gold eased AED2.5 to AED289.25.

Investor uncetainty grows as Fed holds interest rates

Gold prices fell after the Federal Reserve held interest rates steady on Wednesday, while Chair Kevin Warsh reiterated the central bank’s focus on curbing inflation, leaving investors uncertain about the direction of future policy.

The Federal Open Market Committee (FOMC) maintained the federal funds rate at 3.50-3.75 percent for a fifth consecutive meeting. Although the decision was largely anticipated, expectations for a rate increase had risen compared with recent periods amid shifting inflation pressures driven by volatile oil prices.

The uncertainty was reflected in the vote, with Cleveland Fed President Beth Hammack, Minneapolis Fed President Neel Kashkari and Dallas Fed President Lorie Logan backing a 25-basis-point rate hike. While gold is traditionally viewed as a hedge against inflation, higher interest rates tend to weigh on the precious metal’s prices and appeal as it does not generate yield.

Markets are now pricing in a 63 percent probability of a rate hike in September, down from around 81 percent before the Fed’s policy decision, according to CME Group’s FedWatch tool. Investors are also turning their attention to June’s U.S. Personal Consumption Expenditures (PCE) inflation data, due at 12:30 GMT, for further clues on the central bank’s policy path.

Mideast tensions escalate after four-day pause

On the geopolitical front, the U.S. military said it carried out new strikes in Iran on Wednesday, escalating a five-month-long conflict that has expanded beyond its initial fronts and drawn in additional countries across the region.

The attacks ended a four-day pause in direct military exchanges between Washington and Tehran, reviving concerns over further escalation despite recent diplomatic efforts.

Meanwhile, oil prices pared some gains on Thursday as tankers continued departing the Middle East. Analysts said the recent rise in gold prices may prove difficult to sustain, with the precious metal expected to retreat toward $3,900 per ounce if oil prices remain under pressure and fail to extend their summer gains.

Other precious metals

As gold prices declined, the broader precious metals market posted mixed movement on Thursday. Spot silver climbed 0.4 percent to $57.86 per ounce, while palladium advanced 1.5 percent to $1,264.49. Platinum, however, slipped 0.6 percent to $1,602.34 per ounce.