Gold Retreats Amid Inflation Concerns and Interest Rate Hike Expectations

Gold prices fell on Wednesday amid bets on interest rate hikes, bolstered by concerns that escalating tensions in the Middle East could fuel inflation, as markets await key US inflation data later this week.

Spot gold fell 0.1 percent to $4,349.44 per ounce by 00:40 GMT. US December gold futures also dropped 1 percent to $4,393.30.

Markets are awaiting the release of the US Producer Price Index tomorrow, Thursday, followed by the Consumer Price Index data on Friday.

The war in the Middle East intensified as Iran-aligned Houthi rebels in Yemen launched attacks on Saudi cities, drawing the US ally deeper into the conflict. Meanwhile, US forces struck several Iranian oil tankers and targeted an Iranian base in Jordan.

Brent crude prices rose for a fourth consecutive session, and rising crude oil prices could exert upward pressure on inflation, as higher energy costs ripple through the broader economy.

According to CME Group’s FedWatch tool, most traders expect the Federal Reserve (the US central bank) to raise interest rates at its upcoming monetary policy meeting.

Although gold is widely viewed as a hedge against inflation, rising interest rates reduce the appeal of the non-yielding metal.

Meanwhile, a Reuters poll showed economists expect the Bank of England to keep interest rates at 3.75 percent through the end of the year and at least until mid-2027, with many still believing inflation is not strong enough to persuade most monetary policymakers to vote for borrowing cost increases.

For other precious metals, spot silver fell 0.1 percent to $65.84 per ounce, platinum rose 0.6 percent to $1,824.53, and palladium dropped 0.2 percent to $1,345.83.