Gold Falls Despite Middle East Tensions as Rate Hike Odds Rise

Gold prices rose slightly on Friday but still fell for a third straight week as investors wait for US consumer inflation data that could decide whether the Federal Reserve raises rates next week. Spot gold edged up 0.4% to about $4,338 an ounce in Asian trading after plummeting sharply on Thursday.

Despite geopolitical tensions in the Middle East lifting oil prices and inflation expectations, bullion remains down over 2% this week due to higher Treasury yields and stronger rate-hike expectations eroding demand for non-yielding metal. The 10-year US yield has pushed close to 5%, while markets now see roughly a 70% chance of a September increase.

The producer price index rose 0.4% in August, with goods prices climbing 1.1% led by energy, and core producer inflation accelerating on an annual basis. This hardened the view that inflation remains too persistent for the Fed to relax.

Analysts noted that gold has so far held the lower end of its recent range despite the jump in yields, but the short-term picture has weakened. The World Gold Council said global gold-backed ETFs attracted $18 billion in August, with holdings rising by 121 tonnes to a record 4,189 tonnes.