SerpApi.Org
By Sukanya Mitra
July 23 (Reuters) - Gold retreated on Thursday, as the intensifying Middle East conflict drove up oil prices and supported investor concerns that inflationary pressures could push the U.S. Federal Reserve to raise interest rates later this year.
Spot gold dropped 1% to $4,087.90 per ounce by 1045 GMT, having hit its highest level since July 7 at $4,165.87 per ounce on Wednesday. U.S. gold futures for August delivery slid 1.5% to $4,091.20.
"Markets have shown they are not prepared to give up the $4,000 level without a fight," said Nikos Tzabouras, senior market analyst at Jefferies-owned Tradu.com.
Tzabouras added that geopolitical escalation, higher oil prices and the higher-for-longer rate outlook leave gold vulnerable to deeper declines toward $3,900 in the coming days.
"Even if policymakers leave rates unchanged (at next week's Fed meeting), as expected, the conflict in the Middle East continues to fuel inflation risks, supporting expectations for monetary tightening."
Traders are pricing in about a 78% chance of a Fed interest-rate hike in September, up from 68% on Wednesday, according to the CME FedWatch Tool. [FEDWATCH]
The Iran-aligned Houthis said they struck two Saudi oil tankers as part of a naval blockade on Saudi Arabia, threatening to create a second chokepoint on global oil supplies. The U.S. military completed a 12th successive night of attacks on Iran, prompting further retaliation.
Oil prices rose for a fifth day. [O/R]
Elevated oil prices due to Gulf supply disruptions have been weighing on gold prices as they raised expectations of higher-for-longer interest rates, which tend to diminish the appeal of non-yielding gold.
Meanwhile, the European Central Bank is all but certain to keep interest rates unchanged on Thursday but will hold the door wide open to another rate hike in September.
Among other metals, spot silver slid 1.8% to $58.6591 per ounce, platinum fell 1.4% to $1,622.33, and palladium dipped 1.6% to $1,270.04.
(Reporting by Sukanya Mitra and Swati Verma in Bengaluru; Editing by Harikrishnan Nair)
