Gold prices decline

Gold fell on Thursday as an escalating Middle East conflict fuelled concerns that the US Federal Reserve could hike interest rates this year.

The developments overshadowed recent optimism over easing inflation.

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Spot gold was down 0.9 percent at $4,024.60 per ounce by 0729 GMT.

US gold futures for August delivery lost 0.6 percent to $4,029.50.

June inflation figures did not reflect the impact of the latest escalation in the US-Iran conflict.

The interim peace union reached last month has effectively unravelled, said Jigar Trivedi, a senior research analyst at IndusInd Securities.

The US launched two waves of attacks on Iran’s coastal defences and missile sites on Wednesday.

This came after it reimposed a naval blockade of its ports.

Iran struck back by targeting US military sites in neighbouring countries.

It called the confrontation an existential war with America.

Oil prices have risen 11 percent so far this week.

This has stoked concerns about inflation and higher-for-longer interest rates.

While gold is traditionally seen as an inflation hedge, it loses its appeal in a high interest rate environment.

US consumer and producer inflation slowed in June amid a pullback in the cost of energy products.

This reinforced evidence that inflation was subsiding before the recent escalation in the Middle East conflict.

The moderation in inflation was, however, not enough to convince financial markets to rule out a Fed rate hike this year.

Traders are still pricing in about a 73 percent chance of a December Fed hike, CME FedWatch Tool’s data showed.

Fed Governor Lisa Cook said on Wednesday she is prepared to act if inflation does not soon begin to slow.

Fed Chairman Kevin Warsh also declared his determination to bring inflation down without hinting at how.

Investors are now looking out for remarks from Dallas Fed President Lorie Logan and Fed Vice Chair Philip Jefferson.

Both are due to speak later in the day.