Middle East Conflict Sours Gold Outlook Amid Rate Hike Expectations

The conflict in the Middle East has pushed financial markets into risk-averse mode. The US Federal Reserve's decision to hike interest rates in September is causing investors to bet on a rate increase, which is putting downward pressure on gold prices.

Gold attempted to regain its bullish momentum earlier this year but faltered around $4,700 and is now struggling to hold above the $4,400 mark. The XAU/USD pair peaked in late August after speculation that the US Fed would not hike interest rates in September reduced.

The conflict between the US and Iran has disrupted oil prices, causing energy costs to skyrocket and exposing a fragile equilibrium between economic growth and inflation. This has led the Federal Reserve to lean towards rate hikes, which is contributing to the downward pressure on gold prices.