By: Economy Middle East

Gold prices slipped on Friday but remained on course for their first monthly gain in five months as investors assessed Middle East developments and their potential impact on the U.S. Federal Reserve’s interest rate path.

Spot gold dropped 0.52 percent to $4,082.59 an ounce by 6:26 GMT, though it was set to post a 0.72 percent weekly increase. The precious metal had gained around 1.84 percent so far this month. Meanwhile, U.S. gold futures for August delivery fell 0.46 percent to $4,081.25 an ounce.

In the UAE, gold rates edged lower, with 24-carat gold losing AED3.75 to AED491.75 and 22-carat gold declining AED3.25 to AED455.5.

In addition, 21-carat gold dipped AED3.25 to AED436.75 and 18-carat gold ticked down AED2.75 to AED374.25.

Meanwhile, 14-carat gold eased AED2.25 to AED292.

Stronger U.S. dollar weighs on bullion

Gold prices faced mild downward pressure on Friday as investors took profits following the metal’s recent gains, while a modest recovery in the U.S. dollar weighed on demand. The greenback rose around 0.3 percent after plunging 2.4 percent on Thursday in its sharpest one-day decline since January 2023.

A stronger dollar typically makes gold and other dollar-denominated commodities more expensive for holders of other currencies, putting pressure on prices.

Gold prices also came under pressure as rising concerns over elevated oil prices and their potential inflationary impact fueled expectations that global central banks could adopt a more hawkish policy stance. The precious metal still posted gains this week after the Federal Reserve kept interest rates unchanged as widely expected, although Chair Kevin Warsh offered few signals on the central bank’s outlook for inflation and future rate decisions.

The Fed’s decision, however, highlighted divisions among policymakers, with at least three officials favoring higher rates amid persistent inflation pressures. Warsh also reaffirmed the central bank’s commitment to its 2 percent annual inflation target.

A softer-than-expected reading of the core PCE inflation index for June, released on Thursday, helped ease concerns over persistent inflation pressures and the outlook for interest rates. The gauge is closely monitored by the Federal Reserve as its preferred measure of inflation.

However, core PCE inflation remained above the Fed’s 2 percent annual target, with markets still anticipating at least one interest rate hike from the central bank later this year.

Mideast tensions persist

In the Middle East, a drone attack that triggered fires on two gas vessels at Egypt’s Mediterranean port of Damietta has raised fresh concerns over shipping through the Suez Canal, one of the remaining key export routes for Saudi oil amid the escalating U.S.-Iran conflict.

Over the long term, the Hormuz crisis is likely to fade, but geopolitical fragmentation, deglobalization trends and U.S. fiscal imbalances are expected to continue supporting gold prices as a hedge against U.S. assets, said analysts.

Other precious metals

As gold prices declined, broader precious metals posted mixed results in July but were on track for weekly gains as a weaker U.S. dollar boosted demand for commodities priced in the greenback.

Platinum was the strongest performer, with spot prices heading for a 5.2 percent monthly gain and a 2.6 percent rise over the week. On the other hand, silver underperformed, with spot prices largely unchanged in July, though they were up 0.8 percent for the week.

Copper also benefited from dollar weakness, while expectations of tighter supply and stronger near-term industrial demand supported prices. LME copper futures climbed 3.2 percent in July, while COMEX futures were set to gain 3.8 percent.