By: Economy Middle east

Gold prices declined on Friday and were headed for a weekly decline as surging oil prices stoked concerns about inflation and the prospect of prolonged high interest rates, with U.S.-Iran peace negotiations still at an impasse.

As of 4:33 GMT, spot gold edged down 0.60 percent to $4,666.43 per ounce, bringing its losses for the week to nearly 3.5 percent and snapping a four-week rally. Meanwhile, U.S. gold futures for June delivery slipped 0.92 percent to $4,680.66.

In the UAE, gold rates declined further, with 24-carat gold and 22-carat gold falling AED3.5 to AED562.25 and AED520.5, respectively.

Additionally, 21-carat gold dipped AED3.25 to AED499, and 18-carat gold edged down AED2.75 to AED427.75.

Meanwhile, 14-carat gold fell AED2 to AED333.75.

Energy-driven inflation raises prospects of higher interest rates
Gold prices fell as Brent crude climbed more than 17 percent this week, holding above $106 per barrel, as the strategic Strait of Hormuz remains mostly shut despite the extension of the Iran ceasefire.

As long as the threat of a prolonged shutdown of the Strait of Hormuz persists, oil prices are likely to remain elevated, putting pressure on gold prices. Rising crude prices can also drive inflation by increasing transportation and production costs, which in turn raises the chances of interest rates staying higher for longer.

Although gold is traditionally seen as a hedge against inflation, higher interest rates tend to boost the appeal of yield-generating assets, reducing demand for the precious metal.

Treasury yield, dollar strength pressure bullion

Gold prices were also pressured by a stronger dollar, which has risen 0.7 percent so far this week, making dollar-denominated gold more expensive for holders of other currencies.

Iran signaled its firmer control over the Strait on Thursday by releasing footage of commandos in a speedboat boarding a large cargo vessel, following the breakdown of peace talks that Washington had hoped would reopen one of the world’s most critical shipping routes.

Donald Trump told reporters he believed Tehran was still interested in reaching an agreement, but said its leadership appeared unsettled. He added that while he was not rushing into a deal, “I’ll finish it up militarily” if Iran chooses not to proceed.

Meanwhile, benchmark 10-year U.S. Treasury yields have climbed more than 2 percent this week, raising the opportunity cost of holding non-yielding assets like gold.

Other precious metals

As gold prices declined, the precious metals market declined, with spot silver slipping 0.90 percent to $74.75 per ounce, platinum declining 1.03 percent to $1,985.37, and palladium easing 0.40 percent to $1,462.25.