Gold Prices Slip as Oil Rises Amid US Interest Rate Hike Expectations

On Thursday, gold prices fell back from their highest levels in two weeks recorded in the previous session, as escalating conflicts in the Middle East pushed oil prices upward. Market participants are turning their attention to the US Federal Reserve's meeting scheduled for next week, seeking clues on the timing of potential interest rate increases.

At 03:24 GMT, spot gold held steady at $4,132.01 per ounce after climbing to $4,165.87 in the prior session, marking its highest point since July 7. Meanwhile, US gold futures for August delivery declined by 0.4 percent to $4,134.60.

Jigar Trivedi, a senior research analyst at IndusInd Securities, noted, "Oil continues to rise, which adds inflationary pressure and expectations of US interest rate hikes, limiting gold's positive momentum amid a weaker dollar."

Oil prices reached their highest levels in over six weeks following a new round of US strikes on Iran and the Houthi movement in Yemen announcing attacks on two oil tankers in the Red Sea.

The US dollar dropped by 0.1 percent, making dollar-priced gold less expensive for holders of other currencies.

Yields on two-year US Treasury bonds climbed to a 17-month peak as rising oil prices sparked concerns that renewed energy supply disruptions could fuel inflation and increase the likelihood of US interest rate hikes.

The Federal Reserve is set to meet next week and is widely expected to maintain interest rates unchanged.

According to the CME FedWatch tool, traders currently assign a 77 percent probability to an interest rate increase in September.

The European Central Bank is almost certain to keep interest rates steady on Thursday but is expected to leave the door open for a further rate hike in September.

In other precious metals, spot silver prices rose by 0.3 percent to $59.90 per ounce, platinum increased by 0.7 percent to $1,656.24, and palladium advanced by 0.8 percent to $1,301.25.