By: Economy Middle East

Gold prices declined on Thursday, trading near a one-week low reached in the previous session, as renewed U.S.-Iran tensions pushed oil prices higher and revived concerns over inflationary pressures and the possibility of interest rates remaining elevated for longer.

As of 4:28 GMT, spot gold fell 0.44 percent to $4,059.70 per ounce, after touching its lowest level since July 1 on Wednesday. U.S. gold futures for August delivery also slipped 0.34 percent to $4,068.45.

In the UAE, gold rates declined, with 24-carat gold and 22-carat gold losing AED0.25 to AED489.75 and AED453.5, respectively.

In addition, 21-carat gold and 18-carat gold declined AED0.5 to AED434.75 and AED372.5, respectively.

Meanwhile, 14-carat gold dipped AED0.25 to AED290.75.

Renewed Hormuz tensions keep U.S. dollar near 13-month high
Gold prices declined after the U.S. military said on Wednesday that it had launched fresh strikes on Iran aimed at keeping the Strait of Hormuz open to maritime traffic, prompting retaliatory Iranian attacks on U.S. military sites in Kuwait and Bahrain and further complicating efforts to bring the conflict to an end.

Oil prices extended their gains on Thursday as tensions continued to escalate.

The precious metal extended a three-session losing streak after renewed U.S.-Iran military tensions pushed oil prices sharply higher, fueling concerns that rising energy costs could prolong inflationary pressures and influence the path of interest rates.

The U.S. dollar also gained from expectations of higher inflation, with the dollar index holding near its highest level in 13 months reached in June.

The downward pressure on gold has also been driven by market expectations for further Federal Reserve rate increases, with investors now pricing in the possibility of a second hike as early as the first quarter of next year.

Inflation concerns weigh on gold prices

Gold prices found little support from the minutes of the Federal Reserve’s June meeting, which revealed a divided outlook among policymakers over whether further interest rate increases would be needed.

According to the CME FedWatch tool, markets are assigning a 68 percent probability of a rate increase in September and an 87 percent chance of another hike in January 2027.

Meanwhile, concerns over persistent inflation intensified during the U.S. central bank’s meeting last month, as policymakers adopted a more streamlined policy statement following Fed Chair Kevin Warsh’s approach, despite growing worries that broader price pressures could require additional rate increases.

U.S. inflation has accelerated significantly since the start of the U.S.-Iran war in late February, with price growth continuing to run well above the Fed’s 2 percent annual target. Fed Chair Kevin Warsh recently reaffirmed the central bank’s commitment to bringing inflation back to its target during a public address.

Other precious metals

As gold prices declined, the precious metals market saw mixed movement. Spot silver declined 0.9 percent to $57.77 per ounce, while platinum advanced 0.8 percent to $1,591.13 and palladium climbed 0.8 percent to $1,223.95.