By: Economy Middle East

Gold prices declined from their two-week highs reached in the previous session on Thursday, as escalating Middle East tensions continued to drive oil prices higher. Traders also shifted their focus to next week’s Federal Reserve meeting for indications on the potential timing of interest rate cuts.

As of 4:34 GMT, spot gold fell 0.08 percent to $4,126.70 per ounce, after climbing to $4,165.87 in the prior session, its highest level since July 7. Meanwhile, U.S. gold futures for August delivery declined 0.55 percent to $4,129.20 per ounce.

In the UAE, gold rates edged lower, with 24-carat gold losing AED4.5 to AED496.25 and 22-carat gold easing AED4 to AED459.75.

In addition, 21-carat gold declined AED3.75 to AED440.75 and 18-carat gold dipped AED3.25 to AED377.75.

Meanwhile, 14-carat gold fell AED2.5 to AED294.75.

Energy-driven inflation continues to support rate hike bets

Gold prices declined as oil continued to climb, adding to inflationary pressures and reinforcing expectations of potential Federal Reserve rate hikes, limiting gold’s upside despite a weaker dollar. Crude prices rose to their highest level in more than six weeks as the United States launched fresh strikes on Iran and Yemen’s Houthis targeted oil tankers in the Red Sea.

In addition, the U.S. dollar slipped 0.1 percent, making gold priced in the greenback more affordable for investors holding other currencies.

Meanwhile, two-year U.S. Treasury yields, which are sensitive to interest rate expectations, climbed to a 17-month high as surging oil prices raised concerns that renewed energy supply disruptions could fuel inflation and increase the likelihood of further Fed rate increases.

All eyes turn to Fed’s meeting next week

The Federal Reserve is set to meet next week, with the central bank widely expected to leave interest rates unchanged. However, futures markets are largely pricing in at least one rate hike by the end of the year.

According to the CME FedWatch Tool, traders are currently assigning a 77 percent probability of a rate increase in September. Higher interest rates typically weigh on demand for non-yielding assets such as gold.

Meanwhile, the European Central Bank is also expected to keep rates steady on Thursday, while leaving the possibility of another rate hike in September open.

Other precious metals

As gold prices declined, the broader precious metals market saw upward movement on Thursday. spot silver gained 0.3 percent to $59.90 per ounce, while platinum rose 0.7 percent to $1,656.24 and palladium advanced 0.8 percent to $1,301.25 per ounce.