Gold rises on weaker dollar as Mideast conflict intensifies

Gold prices firmed on Wednesday as a subdued US dollar and escalating Middle East tensions between the United States and Iran lent support to precious metals, even as expectations for a Federal Reserve rate hike next week capped gains. Silver climbed nearly 1% to near $66.40 an ounce, buoyed by the same forces.

Dollar Weakness and Safe-Haven Demand

Spot gold rose in Asian and early European trading, with CNBC reporting a 0.4% gain to $4,372.19 per ounce as of 0230 GMT, while Investing.com noted a 1.0% rise to $4,397.47 by 0525 ET as the session progressed. The US Dollar Index hovered near a two-week low around 98.75, making dollar-priced metals more affordable for holders of other currencies. Analysts cited by Reuters pointed to recent strength in the Japanese yen as a key driver of the greenback's relative weakness.cnbc+2

The Middle East conflict continued to intensify, with Iranian-backed Houthis in Yemen launching strikes on several Saudi cities and US forces hitting Iranian oil tankers, while Iran struck a US base in Jordan. Brent crude futures topped $100 a barrel for the first time since July, underlining worries over energy supply disruptions through the Strait of Hormuz. Rising crude prices tend to put upward pressure on inflation, adding another layer of complexity to the gold outlook.investing+1

Fed Rate Hike Expectations Weigh on Gains

According to the CME FedWatch Tool, traders are pricing in roughly a 60% chance that the Fed will raise interest rates by 25 basis points at its September 17 meeting, up from about 50% before last Friday's stronger-than-expected jobs report. That shift in expectations has kept a lid on gold's advance.reuters+1

"Gold is range-bound because it is capped by a higher probability of raising interest rates, which continues to hinder momentum in the market," Daniel Pavilonis, senior market strategist at StoneX, told Reuters on Tuesday. Kelvin Wong, senior market analyst at OANDA, described "a tug of war in the short term between the bulls and the bears" that could persist until Friday's consumer price index report.cnbc+1

Inflation Data in the Spotlight

Markets are now focused on US producer price index data due Thursday and CPI figures on Friday for fresh signals on the Fed's path. TD Securities projected that core CPI rose 2.3% year-over-year in August, down slightly from July, though the bank cautioned that "risks to our forecasts are skewed to the upside given that we're assuming a number of large price declines in tariff-exposed goods categories".fxstreet

Among other metals, platinum rose 1% to $1,831.76 an ounce while palladium edged higher to around $1,360, supported by supply concerns in South Africa and Russia and resilient hybrid-vehicle demand. Rick Kanda, managing director at The Gold Bullion Company, said gold could move back toward its late-August peak of $4,685, but warned that "investors should also be prepared for prices to potentially fall towards the low-$4,000s if rate-hike expectations continue to rise".tradingview+2