Gold falls as rising oil prices fuel inflation and interest rate concerns

Gold prices declined on Tuesday as rising oil prices intensified concerns that inflation and elevated interest rates could remain in place for longer, AzerNEWS reports.

The price of gold fell 0.7% to $4,537.54 per ounce amid growing market anxiety over geopolitical tensions in the Middle East and their potential impact on the global economy.

Diplomatic efforts aimed at ending the ongoing regional conflict continued in Doha, although expectations for a near-term breakthrough remained limited.

At the same time, renewed military activity in the Middle East increased fears of further disruptions to global energy supplies, contributing to a sharp rise in oil prices.

Analysts say that even if a peace agreement is eventually reached, damage to oil production infrastructure in the region could delay the normalization of global oil flows. Markets have already begun pricing in these risks, with investors increasingly expecting additional interest rate hikes this year.

Brent crude futures rose 2% during early Asian trading hours as concerns over supply disruptions persisted.

Higher oil prices are expected to accelerate inflation, potentially forcing central banks to keep interest rates elevated for a longer period. Although gold is traditionally viewed as a hedge against inflation, higher interest rates tend to pressure the non-yielding precious metal.

According to the CME Group FedWatch Tool, markets currently see a 56% probability that the U.S. Federal Reserve will raise interest rates before the end of the year.