Gold Falls on Fed Rate Hike Fears Amid Gulf Tensions

Gold prices have been declining for three consecutive weeks due to rising expectations of a US interest-rate increase, outweighing its traditional appeal as a safe-haven asset during periods of geopolitical uncertainty.

Spot gold recovered around 0.8% to $4,351.97 an ounce on Friday's Asian trading but remained down nearly 2% for the week. US gold futures for December delivery slipped 0.3% to $4,393.10.

The conflicting moves in the bullion market are due to escalating tensions in the Gulf, which should normally encourage investors to buy gold as a safe-haven asset. However, the resulting increase in oil prices has intensified concerns about inflation and pushed traders towards expecting higher interest rates.

Higher rates make interest-bearing assets such as government bonds more attractive, while gold does not pay interest. This weakens its relative appeal when borrowing costs and bond yields rise.