Gold Slips as Middle East Tensions Fuel Inflation and Rate Hike Bets

Gold prices edged lower on Wednesday, pressured by expectations that escalating Middle East hostilities could stoke inflation and prompt the US Federal Reserve to keep interest rates elevated.

Spot gold was down 0.1% at $4,349.44 per ounce, while US gold futures for December delivery fell 1% to $4,393.30.

The conflict in the Middle East intensified, with Iranian-backed Houthis launching strikes on Saudi cities and Iran targeting a US base in Jordan. US forces, in turn, hit multiple Iranian oil tankers. This escalation pushed Brent crude prices higher for a fourth consecutive session, as rising energy costs typically feed into broader inflation.

Traders are now awaiting US producer price index data due Thursday, followed by consumer price index figures on Friday. According to the CME FedWatch Tool, a majority of traders expect the Federal Reserve to raise interest rates at its next policy meeting.

While gold is traditionally viewed as a hedge against inflation, higher interest rates diminish the appeal of non-yielding bullion.

In other metals, spot silver slipped 0.1% to $65.84 per ounce, platinum gained 0.6% to $1,824.53, and palladium fell 0.2% to $1,345.83.