Gold Falls to Three-Week Low Amid Escalating Middle East Tensions

Gold prices fell to their lowest in over three weeks on Wednesday as tensions in the Middle East escalated, driving up oil prices and fueling rate-hike fears. Spot gold declined by 0.6% to $4,304.01 per ounce, its lowest since August 7, while US gold futures for December delivery dropped by 1% to $4,350.80.

The conflict between the US and Iran prompted Iranian retaliation, leading to a third consecutive increase in oil prices. This, in turn, has heightened concerns about inflation and tightened monetary policy expectations, making it more likely that interest rates will rise. As gold is often seen as an inflation hedge, its appeal is diminished when interest rates are higher.

According to Bas Kooijman, CEO of DHF Capital SA, a rebound in oil prices has added to inflation concerns and may limit any potential rebound for gold. The ADP employment report is due later on Wednesday, followed by the more crucial nonfarm payrolls data on Friday. Softer figures could ease pressure on gold, while stronger data or hawkish Fed comments may extend its decline.