By: Economy Middle east

Gold prices edged higher on Thursday after dropping to a one-month low in the previous session, although the upside remained limited as rising oil prices continued to fuel concerns about persistent inflation and prolonged elevated interest rates, while a stronger dollar further capped gains.

As of 4:40 GMT, spot gold gained 0.01 percent to $4,547.86 per ounce, recovering from its lowest level since March 31 a day earlier. Meanwhile, U.S. gold futures for June delivery fell 0.11 percent to $4,556.40.

In the UAE, gold rates declined, with 24-carat gold and 22-carat gold falling AED1 to AED547.25 and AED506.75, respectively.

Additionally, 21-carat gold dipped AED0.75 to AED486, and 18-carat gold edged down AED0.75 to AED416.5.

Meanwhile, 14-carat gold fell AED0.5 to AED325.

Stronger oil prices and dollar impact bullion

Gold prices are attempting a modest rebound but near-term gains remain constrained as firm oil prices and the renewed inflation risks they bring continue to weigh on sentiment. Brent crude climbed above $124 per barrel following reports that the U.S. is considering possible military action against Iran to break the stalemate in efforts to end the war, heightening fears of further supply disruptions in an already strained Middle East export market.

Higher oil prices are adding to inflationary pressures, raising the likelihood that interest rates will stay elevated. While gold is typically viewed as a hedge against inflation, higher interest rates tend to reduce its attractiveness as a non-yielding asset.

“The precious metals market has spent the past several months undergoing a sharp reset. Following an explosive rally that took gold, and not least silver, to fresh record highs, both metals have since corrected – not because their long-term fundamentals have materially weakened, but because the macro backdrop has shifted abruptly in the wake of the Iran war,” said Ole Hansen, Head of Commodity Strategy, Saxo Bank.

Further limiting the rise in gold prices, the U.S. dollar index gained 0.10 percent to 99.06.

Fed keeps interest rates unchanged

The Federal Reserve kept interest rates unchanged on Wednesday in its most divided decision since 1992. The bank flagged growing concerns about inflation. The policy statement drew three dissents from officials who no longer support signaling a bias toward lowering borrowing costs.

Markets have since dialed back expectations for rate cuts this year, with traders now pricing them out entirely. They are instead assigning a 30 percent probability of a rate hike by March 2027, a sharp jump from about 5 percent just a day earlier, according to the CME FedWatch tool.

Meanwhile, U.S. President Donald Trump met with oil companies to discuss ways to offset the impact of a potential months-long blockade of Iran’s ports, a White House official said on Wednesday, as he urged Tehran to “get smart soon” and reach an agreement.

“Earlier this year we did not rule out gold reaching $6,000 by year-end, but since then a $1,500 correction from the $5,595 peak has changed both the path and the timing. For now, rising oil prices and the resulting inflation shock are reinforcing dollar strength and pushing back expectations for monetary easing, reducing the appeal of non-yielding assets such as gold in the short term,” Hansen added.

“However, while the conflict has become a near-term hurdle, it does not represent a roadblock. The structural drivers that powered gold’s rally over the past two years remain firmly in place and, in several cases, have strengthened,” he said.

Other precious metals

As gold prices rose, the precious metals market showed largely positive movement on Thursday. Spot silver rose 0.14 percent to $71.59 per ounce, while platinum advanced 1.26 percent to $1,902.98. However, palladium fell 0.07 percent to $1,457.94.