By: Economy Middle East

Gold prices extended their decline on Wednesday, falling to their lowest level in nearly two weeks as the U.S. dollar strengthened and traders increased expectations for additional Federal Reserve interest rate hikes. While uncertainty surrounding U.S.-Iran peace negotiations continues, markets are placing greater emphasis on monetary policy and its impact on the appeal of non-yielding assets such as bullion.

Spot gold dropped 1.63 percent to $4,064.03 per ounce by 8:47 UAE time after earlier touching its lowest level since June 11. U.S. gold futures for August delivery also declined 1.63 percent to $4,081.67 per ounce.

The decline adds to a broader correction that has seen bullion lose around 23 percent since the U.S.-Israeli conflict involving Iran began in late February. Although geopolitical tensions initially supported safe-haven buying, markets have increasingly shifted their attention toward inflation, interest rates and the outlook for U.S. monetary policy.

Gold traditionally performs well during periods of uncertainty and inflation, but higher interest rates reduce its attractiveness because the metal does not generate income.

UAE gold rates

The global selloff was reflected across the UAE gold market.

According to local rates, 24-carat gold fell AED7.25 to AED491.50 per gram, while 22-carat gold declined AED6.50 to AED455.25 per gram.

Meanwhile, 21-carat gold dropped AED6.25 to AED436.50, 18-carat gold lost AED5.50 to AED374.00, and 14-carat gold slipped AED4.25 to AED291.75 per gram.

The lower prices may attract buyers seeking jewelry or long-term investments, although continued volatility remains possible as markets respond to incoming economic data.

Fed takes focus

The main pressure on gold is coming from shifting expectations surrounding the Federal Reserve.

The U.S. dollar climbed to its highest level in more than a year, making gold more expensive for buyers using other currencies and reducing international demand.

According to the CME FedWatch Tool, traders are now pricing in three U.S. interest rate hikes this year, a sharp increase from expectations of just one hike before last week’s Federal Reserve meeting.

Investors are also awaiting the release of the U.S. Personal Consumption Expenditures (PCE) index on Thursday. As the Federal Reserve’s preferred measure of inflation, the report could significantly influence expectations for future monetary policy.

Geopolitical backdrop

Political developments continue to add uncertainty, although they have had less influence on prices than monetary policy.

U.S. President Donald Trump said on Tuesday that Iran had agreed to allow nuclear inspections indefinitely. Tehran rejected that claim, insisting no such agreement had been reached during negotiations.

The two sides also disagreed over proposals that would allow Iran access to frozen overseas funds, highlighting the fragile nature of the current diplomatic process.

Despite those disagreements, investors appear more focused on the prospect of tighter U.S. monetary policy than geopolitical risks.

Elsewhere in the precious metals market, spot silver fell 1.40 percent to $61.11 per ounce, platinum declined 1.14 percent to $1,634.45, and palladium slipped 0.49 percent to $1,209.00 per ounce.

For now, gold’s direction is likely to remain closely tied to the Federal Reserve’s next policy moves. Stronger inflation data or additional signals that rates could stay higher for longer may keep pressure on bullion, while any weakening in the U.S. dollar or renewed geopolitical escalation could help restore demand for the traditional safe-haven asset.