LONDON: Gold prices retreated sharply on Wednesday as oil extended its rally after US President Donald Trump declared that the interim peace arrangement with Iran was “over”, heightening concerns over renewed geopolitical tensions, rising inflationary pressures and the prospect of higher US interest rates.
Spot gold slipped 1.02 per cent to $4,063.67 per ounce by 0850 GMT (1350 PKT), having earlier touched its lowest level since 2 July. Meanwhile, US gold futures for August delivery dropped 1.97 per cent to $4,074.80 per ounce.
The decline in bullion came as crude oil prices surged following Trump’s remarks, reflecting growing fears that escalating tensions in the Middle East could disrupt energy supplies.
Higher oil prices are widely seen as inflationary, raising expectations that the US Federal Reserve could keep interest rates elevated for longer.
Gold, traditionally regarded as a safe-haven asset during periods of uncertainty, tends to come under pressure when investors anticipate higher interest rates.
Rising borrowing costs increase the opportunity cost of holding non-yielding assets such as gold, making them less attractive compared with interest-bearing investments.
Market participants are closely monitoring developments in the Middle East, as any further escalation could trigger increased volatility across commodity and financial markets.
Analysts said investor sentiment remains highly sensitive to geopolitical developments, with fluctuations in oil prices likely to continue influencing the outlook for precious metals in the coming sessions.
