Gold slips as oil prices rise, rate hike expectations weigh on market

Dubai: Gold prices edged lower on Monday as renewed U.S.-Iran tensions pushed oil prices higher, while expectations of further U.S. Federal Reserve rate hikes weighed on investor sentiment.Spot gold declined 0.5 percent to 4,067.99 per ounce, while U.S. gold futures for August delivery fell 0.4 percent to 4,081.20 in early trading.Geopolitical tensions impact marketsThe decline comes after Iran launched missiles and drones at U.S. military sites in Kuwait and Bahrain, escalating tensions in the Gulf. The developments followed warnings from U.S. President Donald Trump regarding Iran’s compliance with a ceasefire agreement.Despite the escalation, reports indicated that Washington and Tehran have agreed to halt hostilities and resume talks over the Strait of Hormuz, a key global energy shipping route.Oil prices rose in response to the conflict, reflecting concerns over supply disruptions and renewed instability in the region. Higher oil prices typically increase inflationary pressures, which can indirectly impact gold demand.Interest rate outlook weighs on goldData released last week showed that U.S. inflation accelerated in May, exceeding 4 percent for the first time in three years, partly driven by higher energy costs linked to geopolitical tensions.As a result, traders now expect the Federal Reserve to implement three interest rate hikes this year, with markets pricing in a 77 percent probability of a rate increase in December.Higher interest rates tend to reduce the appeal of gold, as the metal does not yield interest and competes with other income-generating assets.Market trends and demandIn physical markets, gold has recently traded at a premium in India for the first time in several weeks, supported by lower prices that encouraged buying. However, demand in China, the world’s largest consumer, has remained relatively weak.Speculative positions in gold have also seen a modest increase, with net long positions rising slightly in the latest reporting period.Other precious metalsElsewhere in the metals market, spot silver dropped 1.1 percent to 58.49 per ounce, while platinum gained 0.4 percent to 1,620.15. Palladium prices fell 0.4 percent to 1,204.25.The broader outlook for precious metals remains tied to interest rate expectations, inflation trends and ongoing geopolitical developments.