By: Economy Middle East

Gold prices advanced on Monday as investors kept a close eye on U.S.-Iran negotiations in Switzerland and weighed the implications of the Federal Reserve’s hawkish stance signaled last week for the outlook of U.S. interest rates.

Spot gold gained 0.39 percent to $4,176.52 an ounce by 4:29 GMT, while U.S. gold futures rose 0.52 percent to $4,194.75.

In the UAE, gold rates rallied, with 24-carat gold gaining AED3 to AED503.75 and 22-carat gold rising AED2.75 to AED466.5.

In addition, 21-carat gold edged AED2.5 higher to AED447.25, while 18-carat gold inched up AED2 to AED383.25.

Meanwhile, 14-carat gold rose AED1.75 to AED299.

Gold prices rise as hopes for easing energy-driven inflation grow
Gold prices fell 1.4 percent last week and entered trading on Monday after three consecutive sessions of losses. However, the precious metal drew support from signs of progress in U.S.-Iran negotiations, which eased concerns over a prolonged disruption to global energy supplies and contributed to lower crude oil prices.

Iran’s foreign ministry said the four-party talks in Switzerland had made good progress, while mediators from Qatar and Pakistan said the parties had agreed on a roadmap for a broader deal. Technical-level discussions are scheduled to continue throughout the week.

The decline in oil prices also helped alleviate inflation concerns, lending support to gold prices by reducing expectations that energy-driven price pressures would prompt the Federal Reserve to adopt a more aggressive monetary tightening stance.

U.S. interest rate hike bets cap gains

Brent crude trimmed earlier gains on Monday as signs of progress in diplomatic efforts emerged, despite persistent tensions surrounding the Strait of Hormuz. However, gold’s advance remained capped by expectations that U.S. interest rates could stay higher for longer.

Investors are still assessing last week’s Federal Reserve meeting, where policymakers retained a hawkish tone and signaled that additional rate hikes remain possible as inflation risks persist.

Comments from Federal Reserve Chair Kevin Warsh during last week’s press conference reinforced concerns over inflation, with the absence of more detailed guidance on what conditions would warrant further tightening leading investors to believe that another rate hike could be approaching.

According to the Fed’s latest projections, nine of the central bank’s 19 policymakers expect that interest rates will need to be raised again this year.

Traders are now pricing in an 89 percent probability of a rate hike in December, up from 61 percent before the Federal Reserve’s meeting, according to the CME FedWatch Tool. The shift reflects growing market expectations of tighter monetary policy following the Fed’s latest guidance. Higher interest rates tend to weigh on non-yielding assets such as gold, limiting gains in spot prices.

In addition, the U.S. dollar index held steady near a 13-month peak reached last week, reflecting sustained strength in the greenback amid expectations of tighter monetary policy.

Meanwhile, investors are awaiting the upcoming U.S. Personal Consumption Expenditures (PCE) price index reading later this week, which is expected to provide key signals on the Federal Reserve’s policy trajectory and future interest rate decisions.

Other precious metals

As gold prices rose, spot silver advanced 1.8 percent to $66.10 per ounce, while platinum edged up 0.2 percent to $1,667.97, and palladium gained 1 percent, trading at $1,270.41.