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Gold prices fell during Friday trading, on track for their largest weekly decline in six weeks, driven by rising oil prices from US-Iran tensions, inflationary pressures, and expectations of higher US interest rates. The US Dollar Index (DXY) remained stable at 100.78. Federal Reserve officials, including Dallas Fed President Lorie Logan and Vice Chair Philip Jefferson, signaled openness to rate hikes if inflation persists. Gold has dropped over 3% this week, its biggest weekly loss since early June, despite earlier easing inflation data. The CME FedWatch Tool shows a 73% probability of a December rate hike.
The decline in gold highlights the inverse relationship between gold prices and US interest rates, as higher rates increase the opportunity cost of holding non-yielding assets like gold. Traders are closely monitoring Fed policy shifts and geopolitical risks in the Middle East, which could further impact both gold and broader markets. The mixed performance of gold futures versus spot prices also reflects short-term speculative positioning.
For Gulf investors, the interplay between oil prices, inflation, and Fed policy remains critical. Rising oil prices may boost regional economies but could also fuel global inflation, complicating central bank decisions. Traders should watch upcoming Fed speeches, Middle East developments, and inflation data for potential market-moving signals.
