By: Economy Middle East

Gold prices extended their decline on Tuesday, putting the precious metal on course for its largest monthly loss since October 2008 as investor attention shifted from geopolitical uncertainty in the Middle East to expectations of higher U.S. interest rates aimed at containing persistent inflation. 

Spot gold fell 0.88 percent to $3,988.01 per ounce by 8:57 a.m. UAE time, leaving bullion down more than 12 percent for the month and on track for a fourth consecutive monthly decline. U.S. gold futures for August delivery also weakened, falling 0.94 percent to $4000.82 per ounce. The latest decline also places gold on course for its first quarterly loss since 2024 and its steepest quarterly drop since the second quarter of 2013. The recent reversal follows a prolonged period of strength in bullion prices, when geopolitical tensions, central bank buying, and safe-haven demand pushed gold to record highs. However, as financial markets increasingly focus on monetary policy rather than geopolitical risks, higher interest rate expectations have become the dominant force influencing precious metal prices.

UAE gold rates decline

The weakness in international bullion markets was reflected across the UAE jewellery sector, with local gold rates posting broad declines. According to the latest market rates, 24-carat gold fell AED7.25 to AED478.50 per gram. Twenty-two-carat gold declined AED6.75 to AED443.00 per gram, while 21-carat gold dropped AED6.50 to AED424.75 per gram. Eighteen-carat gold lost AED5.50 to AED364.00 per gram, and 14-carat gold decreased AED4.25 to AED284.00 per gram. 

UAE gold prices closely track international spot prices while also reflecting currency movements and local market conditions. The decline comes as seasonal demand in regional jewellery markets remains relatively subdued compared with major holiday and wedding periods, leaving international price movements as the primary driver of local pricing.

Fed takes focus

Despite traditionally serving as a hedge against inflation, gold generally becomes less attractive when interest rates rise because higher yields increase the opportunity cost of holding non-interest-bearing assets. Markets are now pricing in three Federal Reserve rate hikes this year, with traders assigning about a 64 percent probability to a September increase, according to the CME FedWatch Tool. 

Investors are also awaiting this week’s U.S. ADP employment report and nonfarm payrolls data, both of which are expected to provide further insight into the Federal Reserve’s next policy decisions. Meanwhile, the U.S. dollar strengthened for a second consecutive month, making dollar-denominated gold more expensive for international buyers and adding further downward pressure on bullion prices. Similar dynamics have influenced previous periods of monetary tightening, when stronger yields and a firmer dollar typically weighed on precious metals.

Precious metals slip

The broader precious metals market also remained under pressure. Spot silver fell 0.71 percent to $57.78 per ounce, platinum declined 0.78 percent to $1,580.85, and palladium slipped 0.31 percent to $1,222.50. All three metals were on track for both monthly and quarterly losses. 

At the same time, oil prices were heading toward their sharpest quarterly decline since 2020 as investors monitored the outcome of possible U.S.-Iran discussions in Doha, although Tehran said no meeting had been scheduled. Analysts say the outlook for gold and other precious metals will largely depend on incoming U.S. economic data, Federal Reserve policy signals, inflation trends, and developments in global geopolitical tensions, all of which are expected to continue driving market volatility during the coming months.