Gold prices fell on Wednesday after rising by more than 2% in the previous session, as higher oil prices fueled inflation concerns and created uncertainty over the outlook for U.S. interest rates, weighing on non-yielding gold.
Spot gold fell 0.5% to $4,035.67 per ounce as of 03:00 GMT.
U.S. gold futures for August delivery declined 0.7% to $4,042.20.
Gold surged by more than 2% to $4,100.49 per ounce on Tuesday, recovering from a two-week low after data showed that U.S. consumer price inflation slowed more than expected in June due to lower energy prices.
Oil prices extended their gains for a third consecutive session after U.S. President Donald Trump reinstated a naval blockade on all Iranian ports and threatened to target power plants and bridges next week unless Tehran resumes negotiations, marking the latest U.S. escalation in the conflict.
Trump said that U.S. strikes on Iran would continue until he determines they have gone far enough, stressing that Washington had urged Tehran to reach an agreement.
In remarks to Fox News, Trump added that U.S. representatives held talks with Iran on Tuesday, noting that Tehran was still showing “some resistance, but not much.”
Kelvin Wong, Senior Market Analyst at OANDA, said, “The market has now moved past the Consumer Price Index data, which is a somewhat lagging indicator… Trump continues to impose a blockade on ships leaving the Strait of Hormuz, pushing oil prices higher and putting pressure on gold.”
Higher crude oil prices could intensify concerns about inflation and keep interest rates higher for a longer period.
Gold is traditionally viewed as a hedge against inflation, but it tends to lose its appeal when interest rates rise because it does not generate a yield.
Among other precious metals, spot silver fell 0.3% to $58.48 per ounce. Platinum rose 0.2% to $1,635.56, while palladium gained 0.2% to $1,307.11.
Reuters
